Foreign investment in Canadian securities focuses on government bonds

Foreign investment in Canadian securities focuses on government bonds
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OTTAWA – According to a Statistics Canada report released this morning, foreign investors acquired $10.0 billion in Canadian securities in April, their ninth consecutive monthly net purchase for a total of $63.9 billion. Foreign investment over the month targeted government bonds, moderated by retirements of private corporate bonds. By comparison, acquisitions of equity securities accounted for the bulk of the foreign investment in the previous four months.

Overall, non-resident investors added $5.5 billion in Canadian bonds to their holdings in April, following a $7.9 billion divestment in March. Foreign investment in federal government bonds amounted to $8.4 billion, the largest investment in one year. This followed four consecutive months of divestment totalling $12.8 billion. In addition, foreign investors purchased $3.9 billion of provincial government bonds, led by new issues of US dollar denominated instruments. By contrast, foreign holdings of private corporate bonds were down by $5.8 billion in April, following a decline of $6.6 billion in March. Retirements of bonds from the banking sector led the activity in both months.

Canadian long-term interest rates fell slightly in April, after an upward trend that began in October 2020. The Canadian dollar exchanged for 81.4 US cents at the end of April, its highest level in six years.

Foreign investment in Canadian equity securities totalled $2.8 billion in April, the lowest amount since October 2020. This activity was down considerably from an average monthly investment of $7.5 billion observed in the previous five months. Foreign investment in April focused on shares in the industry of management of companies and enterprises, and to a lesser extent, on shares of the manufacturing industry. Canadian share prices, as measured by the Standard and Poor’s/Toronto Stock Exchange composite index, rose 2.2% to end April with record-high levels.

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