Foreign investors pull back from Canadian bonds amid rate peaks By


© Reuters.

OTTAWA – Foreign investors have stepped back from Canadian securities, divesting a net total of C$15.09 billion, driven by a significant sell-off in bonds as long-term interest rates hit their highest point since December 2007, according to the latest data from Statistics Canada. This move marks a shift in the investment landscape, reflecting global economic pressures and market responses.

On Friday, it was reported that this retreat was particularly pronounced in the bond market, where non-residents reduced their holdings substantially. However, it wasn’t all outflows; foreign investors showed renewed interest in Canadian stocks, purchasing C$1.62 billion worth of equities and breaking a nine-month trend of pulling funds from this asset class.

The third quarter of 2023 saw a notable shift in capital movement, with a record net outflow of C$41.4 billion from Canada. This exodus reversed the positive inflow of funds experienced during the first half of the year and could signal a reevaluation by investors of Canada’s financial markets amid changing economic conditions.

Meanwhile, Canadian investors have been active abroad, particularly in September 2023, when they invested C$11.60 billion into foreign securities. This included a substantial injection of C$10.46 billion into international bonds, marking the highest quarterly investment in these instruments since late 2021.

The contrasting strategies between foreign and domestic investors highlight the dynamic nature of global investment flows and underscore how varying perceptions of market conditions can influence cross-border investments. The recent data provides insight into how international and Canadian investors are positioning themselves in an environment where interest rates are on the rise and economic signals are mixed.

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