Foreign investment in Canadian federal government debt securities reaches a six-month high

Foreign investment in Canadian federal government debt securities reaches a six-month high
Share this article

 

OTTAWA – Statistics Canada today released Canada’s international transactions in securities, November 2020. According to the press release, foreign investors acquired $11.8 billion of Canadian securities in November, largely purchases of federal government debt securities. At the same time, Canadian investors increased their holdings of foreign securities by $7.6 billion, led by acquisitions of US shares.

As a result, international transactions in securities generated a net inflow of funds of $4.2 billion in the Canadian economy in November, following two months of net outflow of funds.

Canada’s international transactions in securities

Chart 1: Canada's international transactions in securities

Foreign investment in federal government debt securities reaches a six-month high

Foreign investors acquired $11.8 billion of Canadian securities in November. They added both debt and equity securities to their holdings over the month.

Foreign investment in Canadian debt securities reached $7.3 billion, reflecting a strong demand for federal government instruments denominated in Canadian dollars. In November, the federal government’s overall borrowing activity slowed significantly compared with October. Nonetheless, foreign purchases of federal government securities were at their highest in six months. Over the month, non-resident investors acquired $5.9 billion of money market instruments and $4.3 billion of bonds of the federal government. In November, Canadian short-term interest rates moved up for the first time since October 2019, and long-term rates reached their highest level since March.

Foreign investment in federal government debt securities

Chart 2: Foreign investment in federal government debt securities

Non-resident investors reduced their holdings of corporate debt securities by $6.0 billion in November, the largest divestment since July. Retirements of government business enterprise paper and, to a lesser extent, retirements of private corporate bonds accounted for the bulk of the reduction. These retirements were largely in instruments denominated in US dollars. In November, the Canadian dollar continued to appreciate against the US dollar and reached its highest level since September 2018.

Largest foreign investment in Canadian shares since February 2019

Foreign investment in Canadian shares amounted to $4.5 billion in November, the largest investment since February 2019. This activity was led by secondary market acquisitions of shares of the banking sector. In November, Canadian stock prices rose 11.1%, the largest monthly gain since May 2009. The banking sector, as measured by the Standard and Poor’s / Toronto Stock Exchange banks index, outperformed the overall market, with a 14.9% increase in share prices in the month. 

Foreign investment in Canadian equity securities

Chart 3: Foreign investment in Canadian equity securities

Canadian investment in foreign securities focuses on US shares

Canadian investors increased their holdings of foreign securities by $7.6 billion in November. Holdings of foreign equity securities were up for an eighth consecutive month, as investors added $7.1 billion worth to their portfolios. Canadians targeted US shares, with purchases of $8.3 billion in the month, mainly shares of large capitalization technology firms. US stock prices were up by 10.8% in November, the largest monthly gain since April. Meanwhile, Canadians sold $1.2 billion of non-US foreign shares, their fifth consecutive monthly divestment.

Canadian investment in foreign debt securities was down significantly, from $6.4 billion in October to $475 million in November. This decline was led by a slowdown in investment in non-US foreign government bonds and a $1.1 billion divestment in US government bonds. In November, US long-term interest rates reached their highest level since March.

Canadian investment in US securities

Chart 4: Canadian investment in US securities

Related posts

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.