Foreign appetite for Canadian assets hits 2026 low as domestic buyers shun U.S. equities after record-setting Q1 run
Cross-border securities activity slowed sharply in March, with foreign demand for Canadian assets dropping to its lowest point this year and domestic investors pulling well back from the aggressive pace of foreign buying that defined the first two months of 2026.
According to data released by Statistics Canada, Foreign investors took in $4.6 billion of Canadian securities during the month, the weakest reading since January. The result still pushed first-quarter foreign investment in Canadian securities to $57.8 billion in total.
A net inflow of $719 million into the Canadian economy was the outcome once domestic outflows were factored in.
The foreign buying that did occur was concentrated almost entirely in debt. Non-resident investors added $8.5 billion of Canadian debt securities to their portfolios in March, driven largely by provincial government bonds denominated in euro. That gain was partially offset by a $3.8 billion reduction in Canadian shareholdings, the second consecutive month of equity divestment following a $9.1 billion pullback in February.
Bank stocks sold
Banking and energy stocks bore the brunt of foreign selling. Shares in the banking sector fell by $7.5 billion in foreign hands, while energy and mining stocks shed $6.0 billion, with merger and acquisition activity driving the retirements. Canadian share prices dropped 4.6% in March as measured by the S&P/TSX composite index.
Also notable on the debt side: non-residents trimmed their exposure to corporate bonds by $1.7 billion, reflecting retirements of covered bonds, and cut federal government bond holdings by $1.2 billion — the first such reduction after five straight months of buying that totalled $54.9 billion.
On the domestic side, Canadian investors added just $3.9 billion of foreign securities in March, a dramatic deceleration from the $16.7 billion monthly average recorded over the prior four months.
Corporate bond buying
The sharp slowdown masked a record-setting streak in one corner of the market. Canadian purchases of US corporate bonds hit an all-time high for the second month running, reaching $10.4 billion in March after a $4.8 billion investment in February.
Nearly half of those purchases were in bonds denominated in Canadian dollars. Offsetting that, investors cut their positions in U.S. government bonds by $7.8 billion and reduced holdings of foreign money market instruments by $2.4 billion, moves that came as both short- and long-term U.S. interest rates rose during the month.
Canadian purchases of foreign equity securities fell to $1.9 billion in March, down sharply from the $32.7 billion that moved in February. Despite the monthly pullback, the quarter as a whole was historic: investors put an unprecedented $40.3 billion into US shares in the first quarter, with activity concentrated in large-capitalization technology stocks.
