MNI DATA ANALYSIS: Foreign Investors Rotate Out Of Cdn Bonds>

By Yali N'Diaye

     OTTAWA (MNI) - Foreign investors acquired C$2.8 billion of Canadian 

securities in August as their acquisitions of Canadian equities and 

money market instruments outweighed their divestment in Canadian bonds, 

data from Statistics Canada showed Tuesday. 

     Meanwhile, Canadian investors cut their portfolios' exposure to 

foreign securities by C$0.2 billion after a C$13.1 billion investment in 

July. 

     As a result, the net inflow of funds into the Canadian economy, 

which is part of the financial flow account, was C$3.0 billion in 

August. 

     - OUT OF CANADIAN BONDS 

     Foreign investors rotated out of Canadian bonds in August, which 

was reflected in a C$7.4 billion divestment. 

     They sold C$C$3.8 billion of federal government bonds, for a C$32.5 

billion divestment year-to-date, the largest since January-August 2003. 

     Foreign investors also sold C$3.3 billion of private corporate 

bonds, the largest divestment since June 2015. Statistics Canada noted 

that new private corporate issues abroad were at their lowest level in 

30 months. 

     Provincial bonds were the only bond category to attract foreign 

flows in August, and even then, it was barely C$1.0 billion. 

     - FOCUS ON MONEY MARKETS, EQUITIES 

     Inflows into Canadian money markets and equities offset the 

divestment in bonds. 

     Foreign investors' holdings of money market instruments were up 

C$4.9 billion in August. Their acquisitions of Canadian equity and 

investment fund shares reached C$5.3 billion, the highest level since 

May 2017, and the third straight investment. 

     During the month, Canadian short-term interest rates increased 14 

basis points, while long-term rates were up 4 basis points. Canadian 

stock prices fell 1.0%. 

     - CANADIAN INVESTORS FAVOR FOREIGN BONDS 

     While foreign investors moved out of Canadian bonds, Canadian 

investors favored foreign bonds over foreign equities. 

     Investment in foreign bonds was up C$3.6 billion, mostly non-US 

bonds and, to a lesser extent, U.S. corporate bonds. 

     Canadian investors reduced their holdings of foreign equities by 

C$3.7 billion, with a focus on U.S. shares (-C$27.0 billion), while they 

acquired non-US shares. 

--MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com 

[TOPICS: MACDS$,M$C$$$]