According to Statistics Canada, foreign investors bought $7.9 billion in Canadian securities, marking the highest monthly bond investment since April 2020. At the same time, Canadian investors pulled back from foreign holdings, selling off $3.2 billion, mostly in U.S. equities.
The increased appetite for Canadian bonds in January is partly a response to U.S. tariffs and economic uncertainty, as trade tensions were escalating.
Investors poured $33.5 billion into Canadian bonds, with more than half of that going into U.S.-dollar-denominated debt. The biggest beneficiaries were provincial government bonds, which saw a record $10.8 billion in foreign purchases, while corporate bonds also attracted $15.4 billion—the most since April 2022.
Meanwhile, Canadian investors were offloading U.S. stocks at the fastest pace since March 2022, selling $15.6 billion worth in January alone. With U.S. markets facing increased volatility and trade tensions, many Canadians opted for foreign debt instead, purchasing $14.4 billion in bonds, including $6.7 billion in U.S. bonds and $8.4 billion from other countries.
This shift in investment patterns resulted in a net inflow of $11.1 billion into the Canadian economy. The Bank of Canada’s decision to cut its policy rate to 3.0% likely played a role in making Canadian bonds more attractive, while the Canadian dollar’s 0.7% depreciation against the U.S. dollar added to the appeal.
Interestingly, despite a 3.3% rise in the S&P/TSX Composite Index, foreign investors pulled back from Canadian stocks, reducing their holdings by $6.6 billion. This was mainly due to merger and acquisition-related retirements and secondary market sales, reinforcing the idea that investors were prioritizing safer, long-term debt over equities.
Foreign investment in Canadian bonds, by sector of issuer
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Last modified: March 18, 2025