Canada's international transactions in securities down in January

OTTAWA - Canada's international transactions in securities generated a net outflow of funds from the Canadian economy of 2.2 billion Canadian dollars in January 2021, according to Statistics Canada on Tuesday.

Foreign investment in Canadian securities totaled 1.3 billion Canadian dollars in January 2021, the lowest investment in six months.

Meanwhile, Canadian investors bought 3.5 billion Canadian dollars in foreign securities, down considerably from an investment of 26.9 billion Canadian dollars in December 2020.

Foreign investors added a record 10.3 billion Canadian dollars of provincial government bonds to their portfolios in January, led by primary market activities.

Canadian provinces resumed their borrowing activities in international markets, as net issuances amounted to 8.7 billion Canadian dollars, mainly in bonds denominated in U.S. dollars.

However, non-resident investors reduced their holdings of federal government debt securities by 10.9 billion Canadian dollars in January, after accumulating 75.5 billion Canadian dollars in 2020.

It was the largest divestment since March 2018. The decline of foreign holdings in the month was mainly attributable to net retirements of treasury bills.

Canadian investment in foreign securities amounted to 3.5 billion Canadian dollars in January, as sizeable purchases of non-U.S. securities were moderated by divestment in U.S. securities.

Overall acquisition activity slowed considerably in January from an unprecedented investment of 26.9 billion Canadian dollars in last December, nearly all in U.S. shares.

Canadian investors purchased 7.1 billion Canadian dollars of non-U.S. foreign shares, the highest investment in more than a year.

Meanwhile, investors reduced their holdings of U.S. shares by 2.8 billion Canadian dollars, the first divestment since March 2020 when global stocks markets posted substantial losses amid the COVID-19 pandemic.

Canadian investors reduced their holdings of foreign debt securities by 774 million Canadian dollars in January. Sales of U.S. treasury bonds totaled 3.5 billion Canadian dollars, the largest divestment since April 2020.

This activity was moderated by purchases of non-U.S. foreign bonds, largely Canadian dollar-denominated instruments.

In January, U.S. long-term interest rates continued to increase, reaching their highest levels since February 2020. Meanwhile, the Canadian dollar fell slightly against the U.S. dollar.