Canada's international transactions in securities

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Inflows of funds to the Canadian economy continued in September as foreign investors added $7.4 billion of Canadian securities to their holdings, led by acquisitions of federal Treasury bills. Canadian investment in foreign securities slowed to $718 million and remained focused on foreign stocks.

Foreign portfolio investment in Canadian securities

Chart description: Foreign portfolio investment in Canadian securities

Foreign purchases of Canadian money market instruments strengthen

Non-residents acquired $7.2 billion of Canadian short-term securities in September, just short of the $7.4 billion high of July 2011. This investment in September was led by a $5.3 billion purchase of federal paper, for which foreign holdings have increased nearly 50% in the last three months. Foreign investment in instruments issued by provincial governments also contributed to the inflows and was the highest in 2011 at $1.3 billion.

For the third quarter, non-residents' investment in Canadian money market instruments was $16.2 billion, surpassing the high of $9.9 billion in the fourth quarter of 2008. This activity reflected an increase in new issues of Treasury bills and occurred against the backdrop of a narrowing of the spread between long- and short-term interest rates in Canada, a weakening of stock prices in most major world markets, and uncertainty over sovereign debt in parts of Europe.

Limited foreign investment activity in other Canadian securities

Non-residents removed $612 million from their holdings of Canadian bonds in September, following a $6.0 billion acquisition in August. Foreign divestment in September was concentrated in federal government enterprise bonds, mostly retirements. Non-residents also reduced their holdings of federal bonds for a fourth straight month, led by sales of bonds with short-term maturities. This was the third monthly foreign divestment in Canadian bonds in 2011, with the year-to-date inflows just above one-third of what they were in 2010 for the same period. This divestment was partially offset by foreign acquisitions of provincial government bonds, both new issues and secondary market purchases.

Foreign investors purchased $721 million of Canadian equities in September, a fifth straight month of investment. Activity over the month was led by secondary market acquisitions from US investors, as the Canadian dollar depreciated against its US counterpart for a second month in a row. Canadian stock prices declined for a seventh straight month, down 9% in September.

Canadians continue to invest in foreign stock markets

Canadian investors added $1.3 billion of foreign stocks to their portfolios in September, led by acquisitions of US corporate shares. Canadians have invested in foreign stocks in each month of 2011, with September marking the lowest such investment in several months. US share prices declined for a fifth straight month in September, while other major global stock markets also posted losses in the month.

Canadians continue to reduce their holdings of foreign debt instruments

Canadian investors reduced their holdings of foreign bonds by $469 million in September, mostly US corporate bonds. September's divestment, the lowest in seven months, was moderated by the first net acquisition of US government bonds since February 2011.

Canadians also reduced their holdings of foreign money market instruments by $151 million in September, all US Treasury bills. Short-term interest rates in the United States fell to 0.01% by month-end.

Canadian portfolio investment in foreign securities¹

Chart description: Canadian portfolio investment in foreign securities

Available on CANSIM: tables 376-0018 to 376-0029, 376-0042, 376-0058 and 376-0063.

Definitions, data sources and methods: survey number 1535.

The September 2011 issue of Canada's International Transactions in Securities (67-002-X, free) will soon be available.

Data on Canada's international transactions in securities for October will be released on December 16.

For more information, or to order data, contact Client Services (613-951-1855; infobalance@statcan.gc.ca). To enquire about the concepts, methods or data quality of this release, contact Brian Law (613-951-3835; brian.law@statcan.gc.ca) or Éric Boulay (613-951-1872, eric.boulay@statcan.gc.ca), Balance of Payments Division.