Newly published data from Statistics Canada shows a significant pull back in May after the record high of the previous month
Cross-border securities transactions slowed in May; the latest month of figures released by Statistics Canada.
Canadians added just $573 million in foreign securities to their holdings, a significant slowdown from the record high of $29.2 billion in the previous month.
Topping the shopping list were US Treasury bonds with $3.3 billion purchased as long-term interest rates reached their highest level in four years.
But Canadian investors pulled back from non-US foreign bonds with a total of $879 million compared to the record $9.6 billion in April.
Continuing a theme for 2022, Canadians sold $837 million in foreign shares in May, cutting their exposure to US equities by $1.7 billion after adding $5 billion in April.
Foreign investors cut back
Foreign investors also reduced their purchase of Canadian securities in May.
The $2.3 billion in acquisitions marked the lowest investment since January 2021; from January to April foreign investors added $96.2 billion to their holdings.
The activity in May mainly targeted debt securities of government business enterprises and was moderated by a reduction in foreign holdings of government short-term debt instruments.
Despite interest in Canadian public corporations’ debt, corporate bonds saw a significant reduction from foreign investors at $4.5 billion, the lowest of the year so far. A large part of this was the lower number of new issues from Canadian corporates with retirements outpacing new issues abroad by $86 billion, the first time that’s happened in 2022.
With Canada’s short-term interest rates rising while long-term rates fell for the first time since December 2021, non-resident investors cut their exposure to Canadian federal (-$5.4 billion) and provincial (-$1.3 billion) money market instruments.
Canadian equities continued to be divested by foreign investors, with a $1.2 billion reduction in May adding to the $570 million divestment in April. The S&P/TSX Composite Index was down in April and May.
