Canada's international transactions in securities, July 2012

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Non-resident investors acquired $6.7 billion of Canadian securities in July, following a $7.8 billion divestment in June. Canadian investment in foreign securities strengthened to $4.6 billion and was equally split between debt and equity securities.

Foreign investors focus on Canadian bonds

Foreign investors purchased $6.1 billion of Canadian bonds in July, following large retirements in June that reduced their holdings. Activity in July was on par with the monthly average investment since January 2012, and was led by secondary market purchases of $3.9 billion in federal bonds and $1.3 billion in provincial bonds. New issues of Canadian bonds in foreign markets slowed notably in July. By month-end, Canadian long-term interest rates had fallen for a fourth straight month to reach a low of 1.6%.

Non-residents reduced their holdings of Canadian money market instruments by $4.1 billion in July, following three straight months of investment. A reduction of $2.9 billion in foreign holdings of federal government paper led the divestment, mostly from retirements as well as sales of these instruments near maturity. Foreign investor holdings of provincial paper were reduced by $1.5 billion, also from retirements.

Chart description: Foreign portfolio investment in Canadian securities

CSV version of the chart

Non-resident investment in Canadian equity reflects mergers and acquisitions activity

Non-residents added $4.7 billion to their holdings of Canadian equities in July, the largest investment since February 2011. New equity issues led the inflows over the month, with the bulk related to cross-border merger and acquisition activity. Non-resident investors also acquired Canadian stocks on the secondary market as prices edged up, with a focus on shares from the energy sector.

Canadian investment in foreign debt market led by US government securities

Canadian investors added $2.3 billion of foreign debt instruments to their holdings in July, comprised of almost equivalent amounts of bonds and money market instruments. Investment was primarily in US government securities, with investors acquiring bonds for a second straight month and purchasing the largest amount of US Treasury bills since October 2010. This investment was moderated by large retirements of Canadian dollar denominated foreign bonds over the month. In July, the differential between long- and short-term interest rates in the United States narrowed to the lowest level since January 2008, while the Canadian dollar appreciated against the US dollar for a second straight month.

Chart description: Canadian portfolio investment in foreign securities

CSV version of the chart

Investment in foreign stocks reaches a four-month high

Canadian investment in foreign stocks rebounded in July with purchases of $2.3 billion, following a small divestment in June. US stocks accounted for nearly two thirds of the outflows, led by information technology shares. US stock prices increased for a second month in July.