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Canada's international transactions in securities, October 2018

Released: 2018-12-17

Foreign investment in Canadian securities totalled $4.0 billion in October, down from $7.8 billion in September. At the same time, Canadian investment in foreign securities increased to $14.9 billion, the largest investment since January 2018.

As a result, international transactions in securities generated a net outflow of funds of $11.0 billion from the Canadian economy in October.

From January to October 2018, portfolio investment generated a net inflow of funds in the economy of $4.8 billion, compared with $100.7 billion for the same period in 2017. Lower foreign purchases of Canadian government bonds combined with higher Canadian purchases of foreign bonds in 2018 explained the difference. Interest rates in the United States have increased by more than their Canadian counterparts so far in 2018.

Foreign acquisitions of Canadian bonds resume

Foreign investment in Canadian securities totalled $4.0 billion in October and mainly targeted the Canadian bond market.

Chart 1  Chart 1: Foreign investment in Canadian securities
Foreign investment in Canadian securities

Foreign investors resumed their acquisitions of Canadian bonds by adding $4.4 billion to their holdings in October, following two consecutive months of divestment. The activity in the month mainly reflected new issues abroad of provincial government and private corporate bonds denominated in US dollars. Non-resident investors acquired $1.1 billion worth of federal government bonds, the first investment in three months.

In the Canadian money market, foreign investors reduced their holdings of short-term paper by $2.2 billion in October. A divestment in corporate paper was moderated by an investment in government paper. This activity followed two strong months of foreign investment in money market instruments.

Canadian short-term interest rates were up 22 basis points and long-term interest rates increased by 7 basis points in October. The Bank of Canada raised its benchmark overnight interest rate by 25 basis points to 1.75% in October, the third increase in 2018. Meanwhile, the Canadian dollar depreciated against its US counterpart by 1.2 US cents in the month.

Chart 2  Chart 2: Foreign investment in Canadian bonds
Foreign investment in Canadian bonds

Foreign investment in Canadian equities reached $1.8 billion in October, the fifth consecutive month of investment. Foreign purchases mainly targeted shares from the trade and transportation sector. Canadian stock prices were down by 6.5% in October.

Canadian investment in foreign securities increases

Canadian investment in foreign securities increased to $14.9 billion in October, the largest investment since January 2018. Investors purchased foreign bonds and foreign shares during the month, which was marked by greater volatility in equity markets.

Canadian investment in foreign equities reached $8.9 billion in October, the highest investment since January. Canadian purchases of US shares were $4.8 billion in the month, following a divestment of $10.4 billion from January to September. US stock prices fell by nearly 7% in October after increasing 8.3% in the first nine months of the year.

Canadian investment in foreign debt securities totalled $6.0 billion in October. Acquisitions of non-US foreign bonds and US Treasury bonds were the main contributors to the increase. US long-term interest rates were up by 15 basis points and US short-term rates increased by 12 basis points in the month.

Chart 3  Chart 3: Canadian investment in foreign securities
Canadian investment in foreign securities


  Note to readers

The data series on international transactions in securities covers portfolio transactions in equity and investment fund shares, bonds and money market instruments for both Canadian and foreign issues. This activity excludes transactions in equity and debt instruments between affiliated enterprises, which are classified as foreign direct investment in the international accounts.

Equity and investment fund shares include common and preferred equities, as well as units/shares of investment funds.

Debt securities include bonds and money market instruments.

Bonds have an original term to maturity of more than one year.

Money market instruments have an original term to maturity of one year or less.

Government of Canada paper includes Treasury bills and US-dollar Canada bills.

All values in this release are net transactions unless otherwise stated.

Next release

Data on Canada's international transactions in securities for November 2018 will be released on January 18, 2019.

Products

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X) is available.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is also available. This publication will be regularly updated to maintain its relevance.

The updated Canada and the World Statistics Hub (Catalogue number13-609-X) is available online. This product illustrates the nature and extent of Canada's economic and financial relationship with the world using interactive graphs and tables. This product provides easy access to information on trade, investment, employment and travel between Canada and a number of countries, including the United States, the United Kingdom, Mexico, China and Japan.

Contact information

For more information, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca).

To enquire about the concepts, methods or data quality of this release, contact Éric Simard (613-219-5932; eric.simard@canada.ca), International Accounts and Trade Division.

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