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Canada's international transactions in securities, June 2020

Released: 2020-08-17

Foreign investors reduced their holdings of Canadian securities by $13.5 billion in June as they divested in both debt and equity securities. Meanwhile, Canadian investment in foreign securities reached $10.6 billion, led by acquisitions of US equities.

As a result, international transactions in securities generated a net $24.1 billion outflow of funds from the Canadian economy in June. This activity followed five straight months of net inflows of funds which amounted to $132.3 billion.

Chart 1  Chart 1: Canada's international transactions in securities
Canada's international transactions in securities

Foreign divestment in Canadian debt securities targets mainly the instruments of provincial governments

Foreign investors reduced their holdings of Canadian debt securities by $7.8 billion in June, following two straight months of acquisitions totalling $88.3 billion.

The foreign divestment was primarily in debt securities issued by Canadian provinces (-$7.1 billion) and federal government enterprises (-$4.9 billion), as retirements exceeded new issues in the month. Foreign acquisitions of Canadian private corporate debt securities moderated the overall divestment in June, led by the acquisition of bonds (+$5.3 billion). June marked a seventh straight monthly investment in these bonds.

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

Foreign investors reduced their holdings of federal government debt securities by $1.1 billion in June. This activity reflected a divestment in bonds, a first one in 2020, moderated by purchases of money market instruments. The overall debt issuance activity by the federal government was down significantly in June compared with May. In June, Canadian long-term interest rates were unchanged at 0.54%, while short-term interest rates edged down to 0.21%, their lowest level since February 2010.

Nonetheless, over the first six months of 2020, the total amount of debt securities owed by the federal government was up by 44.6%. Foreign investors contributed strongly to this financing activity, as their holdings of these instruments increased by 25.0% over this period.

Chart 3  Chart 3: Foreign investment in federal government debt securities
Foreign investment in federal government debt securities

Foreign divestment in Canadian equities continues

Non-resident investors reduced their exposure to Canadian equities by $5.7 billion in June, continuing a divestment trend that began in October 2019. The bulk of the foreign divestment was in shares of the banking sector. Canadian stock prices, as measured by the S&P/TSX composite index, were up by 2.1% in June, while the S&P/TSX Banks index, representing stock prices of the banking sector, was up by 3.1%.

Strong Canadian investment in US shares continues

Canadian investors acquired $10.6 billion of foreign securities in June, adding to an investment of $13.5 billion in May. The activity in June was again led by US equities, with acquisitions totalling $9.4 billion. Canadian investors added $18.9 billion of US shares to their portfolio in the second quarter, after shedding $29.2 billion worth of these instruments in March when global stocks markets posted substantial losses in the context of the COVID-19 pandemic. US stock prices, as measured by the S&P 500 composite index, increased for a third straight month in June and were up 20.0% from March. The Canadian dollar appreciated against the US dollar, ending June at its highest level since February.

Chart 4  Chart 4: Canadian investment in US equities
Canadian investment in US equities


  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.

Customized data tables with additional details are available upon request, subject to the availability of the information.

Next release

Data on Canada's international transactions in securities for July will be released on September 16.

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

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca) or Media Relations (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca).

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