Foreigners reduced their holdings of Canadian securities for the first time in more than a year in June, as the value of bonds maturing exceeded new purchases.
Foreign investors sold a net C$3.46 billion ($3.53 billion) of Canadian securities, the first reduction in 15 months, Statistics Canada said today in Ottawa. Economists forecast a net purchase of C$10 billion according to the median of four responses taken by Bloomberg News.
About C$11.8 billion of Canadian bonds matured in June while foreigners bought C$10.3 billion of debt to replace them, and investors divested of another net C$981 million of money- market paper.
International purchases of Canadian bonds have set records the last two years, as Finance Minister Jim Flaherty has focused on keeping Canada’s deficit and debt smaller than other Group of Seven nations. Foreign holdings of Canadian bonds have increased 30 percent since the end of 2008, today’s report said.
“We don’t see this net selling as part of a trend, particularly with Canadas now offering a credit rating premium versus Treasuries,” Avery Shenfeld, chief economist at CIBC World Markets in Toronto, wrote in a note to clients.
Standard & Poor’s lowered the U.S. government’s credit rating to AA+ from the top grade of AAA on Aug. 5. Canada’s bonds are rated AAA by New York-based S&P.
The yield on Canada’s benchmark three-year government bond rose to 1.17 percent today from 1.15 percent yesterday. The price of the 2.25 percent coupon security due August 2014 fell 4 cents to C$103.14 at 10:43 a.m. Toronto time.
Today’s report also said that Canadians bought a net C$343 million of foreign securities in June, led by stocks.
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