Canadian investors boost foreign bond holdings in February

Canadian investors acquired $24.2bn in foreign securities, led by a record purchase of bonds

Canadian investors boost foreign bond holdings in February

In February, Canadian investors significantly increased their holdings in foreign securities, acquiring $24.2bn worth, marking a shift from the $7.6bn divestment in January.  

This surge was primarily driven by an unprecedented investment in foreign bonds, totaling $16.3bn, the highest in history for a single month.  

The focus was largely on US government bonds, which saw an influx of $9.1bn, and non-US foreign bonds, mainly government instruments, which attracted $4.5bn. This occurred as US long-term interest rates reached their highest levels since November 2023.  

Additionally, Canadian investment in US equities was robust, totaling $9.1bn in February, effectively offsetting a divestment of $7.7bn in January. The investments predominantly targeted large capitalization technology shares, coinciding with a 5.2 percent increase in the S&P 500 index.  

However, there was a sell-off in non-US foreign shares, amounting to $2.7bn, following a $7.2bn divestment the previous month.   

Conversely, foreign investors reduced their holdings in Canadian securities by $8.8bn in February, following three months of cumulative investments totalling $31bn.  

This reduction was marked by a record divestment in Canadian government short-term debt securities, with foreign investors withdrawing $15.1bn. This included $11.8bn from federal government securities and $3.3bn from provincial government securities.  

Despite these reductions, there was significant foreign interest in Canadian corporate bonds, with investments reaching $13.3bn, the highest in a year, driven by new issues of US-dollar denominated bonds by Canadian chartered banks.   

Foreign investment in Canadian equities decreased by $2.7bn across most sectors, except for banking, which attracted $3bn from international investors.  

During this period, Canadian share prices, as indicated by the S&P/Toronto Stock Exchange composite index, continued their upward trend for the fourth consecutive month.   

These transactions resulted in a net outflow of $33bn from the Canadian economy in February, reflecting a complex interplay of investment trends in both domestic and international securities markets.