Foreign investors reduced their holdings of Canadian securities by C$7.9B in June, following two straight months of acquisitions; Canadian investors added C$3.9B of foreign securities

OTTAWA , August 16, 2012 (press release) – Non-residents reduced their holdings of Canadian securities by $7.9 billion in June, following two straight months of acquisitions totalling $36.3 billion. Canadian investors added $3.9 billion of foreign securities to their portfolio, mainly US government bonds.

Foreign holdings of Canadian debt securities down on large retirements of bonds

Foreign investors reduced their holdings of Canadian bonds by $7.8 billion in June, the largest divestment since December 2008. This resulted from a $17.5 billion retirement of maturing instruments, mostly Canadian dollar denominated bonds from the federal government and its enterprises. These retirements were moderated by non-resident investment in Canadian bonds on the secondary market in June, mainly government securities.

Non-resident investors purchased $0.8 billion of Canadian money market instruments in June, down from $7.3 billion in May. Foreign investment of $2.2 billion in federal paper was partially offset by a reduction in foreign holdings of government enterprise and corporate paper. Canadian short-term interest rates fell to their lowest level in 2012 by month-end.

Canadian investors acquired $4.1 billion of foreign bonds in June, the largest acquisition since November 2010. Activity was led by $3.0 billion in acquisitions of US government bonds, largely short-term instruments, and was the largest such purchase in over five years. The remainder of the activity was largely composed of purchases of corporate debt in the maple bond market. The spread between Canadian and US long-term yields narrowed in June but remained favourable for investment in Canada, as the Canadian dollar appreciated against its US equivalent.

Canadian investors reduced their holdings of foreign equities by $0.2 billion in June, as prices in major world equity markets increased after posting sizable declines in May. Sales of non-US foreign stocks, a first divestment in these instruments since April 2011, were moderated by further acquisitions of US stocks over the month.

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