Canadian bonds back in fashion for foreign investors

Statistics Canada data shows that foreign investment was mostly in corporate and government bonds

Canadian bonds back in fashion for foreign investors
Steve Randall

Foreign investors resumed their interest in Canadian bonds in July, buying almost $15 billion worth following a divestment of almost $18 billion in June.

Statistics Canada has released its latest data on international investments, which also reveals that Canadian investors bought $4.3 billion in foreign securities in July, marking a sharp turnaround from the $14.6 billion divested in June.

US government bonds were the big purchase, amounting to $5.2 billion, the biggest investment so far in 2022. Year-to-date purchases totalled $13.3 billion. In the same period of 2021, there was a divestment of $354 million.

Canadian investors sold around $1 billion of US equities in July and bought around the same amount of non-US foreign equities. The overall slight reduction in exposure was well below the $12.6 billion in foreign (mostly US) equities they sold in June.

The total reduction in exposure to foreign equities by Canadian investors in 2022 has been more than $55 billion.

Foreign investors’ bond buying

The Canadian bonds bought by foreign investors in July were led by corporate debt ($18.3 billion) while government bonds were also acquired to a lesser extent ($7.5 billion).

The corporate debt bought was mostly new issuances of US dollar-denominated instruments of Canadian chartered banks.

Foreign investors also reduced their holdings of Canadian equities by $2.2 billion following their $12.7 billion divestment in June.