Canada's international transactions in securities, April 2020

Released: 2020-06-16

Foreign investment in Canadian securities reached a record-high of $49.0 billion in April, all in debt securities. Meanwhile, Canadian divestment in foreign securities eased considerably to $134 million, following a record-level divestment in March.

As a result, Canada's international transactions in securities generated a record net inflow of funds in the Canadian economy of $49.2 billion in April, for a total of $120.0 billion since the beginning of the year.

Borrowing needs from governments increased substantially in April to support Canadian enterprises and households impacted by the COVID-19 pandemic. Foreign creditors contributed strongly to these financing activities.

Chart 1 
Canada's international transactions in securities

Unprecedented foreign investment in Canadian debt securities

Foreign investors acquired $54.0 billion of Canadian debt securities in April, following a $39.1 billion investment in the first quarter. April's record foreign investment occurred against the backdrop of a surge in borrowing activities.

In April, the federal government raised a total of $136.8 billion of funds from the issuance of debt securities. This overall borrowing activity led to strong foreign investment on the secondary market, as non-resident investors acquired $15.8 billion of federal government outstanding bonds and $10.2 billion of federal government money market instruments.

Foreign investment in provincial government debt securities amounted to $5.3 billion in April, driven by new issuances of bonds, mainly denominated in non-US foreign currencies, and money market instruments on the international market. Private corporations, led by chartered banks and investment firms, issued a record $25.0 billion of new bonds abroad. A reduction in foreign holdings of Canadian private corporate paper of $6.4 billion moderated the overall inflow of funds in the month.

From December 2019 to April 2020, Canadian long-term interest rates fell 105 basis points to a record low of 0.56%. Meanwhile, Canadian short-term interest rates fell 140 basis points to 0.26%, their lowest level in more than a decade. Long-term interest rates in the US and major European markets continued their downward trend in April, though rates in Canada and the United States generally stood above those of many European countries by month's end. The Canadian dollar posted small gains against most major foreign currencies, following three consecutive months of depreciation.

Chart 2 
Foreign investment in Canadian debt securities, by sector of issuer

Foreign divestment in Canadian shares continues

Non-resident investors reduced their holdings of Canadian shares by $4.9 billion in April, a seventh straight month of divestment. As in March, shares from the banking sector accounted for the largest foreign divestment activity in April. Canadian equity prices rose 10.5% in April, after falling 17.7% in March. Despite the overall increase in stock prices in April, the banking sector, as measured by the S&P/TSX composite sector index for banks, posted a 1.5% decline, after losing 16.4% in March.

Canadian investors sell US government bonds and acquire US corporate securities

Canadian investors sold $134 million of foreign securities in April, following a record divestment in March, when global stock markets fell sharply. The activity in April reflected large sales of US government bonds, which were almost completely offset by acquisitions of US corporate securities.

Resident investors reduced their holdings of US Treasury bonds by $8.8 billion in April, for a total of $19.2 billion since the beginning of the year. Long-term interest rates in the United States fell 120 basis points during this period to 0.66%. April's divestment in US government bonds was moderated by a $1.2 billion investment in US government short-term debt securities.

Canadian investors added $4.4 billion of US shares to their portfolio in April, after selling off $29.2 billion in March. US equity prices swung from a 12.5% decline in March to a 12.7% increase in April. Canadian investment focussed on market index funds and shares issued by large capitalization technology firms. In addition, Canadians invested in US corporate bonds for a third consecutive month, adding $2.3 billion to their holdings during the month.

Chart 3 
Canadian investment in US securities, by type of instruments

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.

The data visualization product "Securities statistics," part of the series Statistics Canada – Data Visualization Products (Catalogue number71-607-X), is available online.

The 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

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