Global investors pounce on Canadian bonds with buying spree set to continue

Foreign investors jumped into Canadian bonds and money market instruments in April at a rate not seen in two years, with bond investments the second highest on record, according to the latest data from Statistics Canada.

At the same time, Canadian investors’ enthusiasm for foreign securities was muted in the same month, with a net investment of $2.5 million as purchases of foreign debt securities and U.S. government bonds in particular were effectively cancelled out by sales of foreign equities.

“Foreign stock markets were very positive through the first three months of the year and much less positive through April,” Josh Sheluk, portfolio manager and chief investment officer at Verecan Capital Management, told Yahoo Finance Canada.

“Money tends to chase performance to some extent and with weaker equity markets, especially globally through April, you could maybe see that Canadian investors might pull back on foreign investments a little bit.”

Global investors spent $41.2 billion on Canadian securities in April, the most since March 2022, when global buyers acquired nearly $47 billion worth. April’s acquisitions were concentrated largely in bonds, primarily in private corporate debt ($12.3 billion), federal government bonds ($10.8 billion) and provincial bonds ($9.8 billion).

National Bank Financial Markets chief rates and public sector strategist Warren Lovely wrote in a note Monday that the total foreign spend on Canadian bonds in April was $32.6 billion, the second-highest amount ever after "the most extraordinary of all COVID months," which saw $50.5 billion invested in April 2020.

“This monthly bond binge builds on what had already been solid international buying, propelling the four-month/year-to-date net investment figure north of $90 billion."

Lovely suggested that the bond binge is poised to continue. “While the latest StatCan data deal with April, provinces continued to tap international markets in May and again June,” he wrote, “with non-resident purchases of this fresh paper to be picked up in future releases.”

Canadian investors spent $35.6 billion on international securities in March, around half of that U.S. equities. But amid a weaker April market that saw the S&P 500 down 4.2 per cent, Canadians sold $11.6 billion worth of international equities, including $9.7 billion in U.S. shares. Canadians spent around the same amount on foreign debt securities in April, including $7.1 billion in U.S. government bonds.

John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf. Download the Yahoo Finance app, available for Apple and Android.