Canada's international transactions in securities
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Non-resident acquisitions of Canadian securities slowed to $2.5 billion in February. Foreign purchases of Canadian equities were up, but non-residents sold Canadian bonds for the first time in more than two years. Meanwhile, Canadian investment in foreign securities strengthened to $2.6 billion in February, led by acquisitions of US government securities.
First reduction in foreign holdings of Canadian bonds since December 2008
Non-residents investors sold $1.6 billion of Canadian bonds in February, the first divestment since December 2008. Prior to February, foreign holdings of Canadian bonds had increased by nearly 30% over the previous 25 months.
The divestment in February was mainly in federal government bonds as non-residents sold $5.0 billion on the secondary market, focusing on shorter term-to-maturity bonds. Foreign holdings of provincial government bonds were also reduced, mainly through retirements, as new issue activity was subdued in the month.
Note to readers
All values in this release are net transactions unless otherwise stated.
The data series on international security transactions cover portfolio transactions in stocks, bonds and money market instruments for both Canadian and foreign issues.
Stoc k s include common and preferred equities, as well as warrants.
Debt securities include bonds and money market instruments.
Bonds have an original term to maturity of more than one year.
Money mar k et instruments have an original term to maturity of one year or less.
Government of Canada paper includes treasury bills and US-dollar Canada bills.
However, activity in government bond markets in February was partially offset by foreign acquisitions of Canadian corporate bonds. In particular, non-residents added $3.6 billion of federal government enterprise bonds, the largest investment since May 2009. Bonds issued by private corporations also attracted foreign inflows, largely the result of secondary market acquisitions of mortgage-backed securities.
Non-residents also withdrew $843 million from the Canadian money market in February, following three months of sizeable investment. This divestment was largely focused in federal government Treasury bills and retirements of US dollar paper issued by federal government enterprises.
Foreign investment in Canadian shares strengthens
Foreign acquisitions of Canadian stocks strengthened to $4.9 billion in February, the largest investment since May 2010. Secondary market purchases of Canadian energy and resources stocks accounted for the bulk of this investment. Canadian stock prices increased for an eighth consecutive month in February, against the backdrop of appreciating global commodity prices, ending the month just off the May 2008 high.
Canadian investors focus on US government debt securities
Canadian investors added both long- and short-term foreign debt securities to their holdings in February, favouring US government securities. Investment in US government bonds of $2.3 billion was widespread across the maturity spectrum, with the exception for the five-year benchmark bond. This bond market activity was moderated by divestment of US corporate bonds, mainly reflecting retirements of maple bonds.
Canadians also acquired $306 million of US Treasury bills in February, but reduced their holdings of European Treasury bills. The Canadian dollar rose 3.1 US cents in February to end the month with the highest exchange rate since October 2007.
Canadian investment in foreign equities slows
Canadians continued to invest in foreign equities in February, but at a much lower pace. They added $221 million of these instruments to their holdings, resulting from a $1.4 billion purchase of US stocks and a $1.1 billion sale of non-US foreign stocks. Divestment was principally in European and Asian markets. By the end of February, US stock prices reached their highest level since May 2008.
Definitions, data sources and methods: survey number 1535.
The February 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 March will be released on May 17.
For more information, or to order data, contact Client Services (613-951-1855; firstname.lastname@example.org). To enquire about the concepts, methods or data quality of this release, contact Yiling Zhang (613-951-2057; email@example.com), Balance of Payments Division.
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