Foreigners Dump Canadian Bonds at Record Levels

(Bloomberg) -- Canada ended 2018 with the biggest foreign investor exodus from its bond market on record amid global financial turmoil at the end of the year.

Foreigners reduced their holdings of Canadian bonds by C$24.8 billion in December, the biggest one-month outflow in data going back at least three decades, Statistics Canada said Friday in Ottawa. Including other assets like equities and money market instruments, foreigners sold a net C$19 billion of all Canadian securities in December, the largest monthly divestment since October 2007.

Foreigners Dump Canadian Bonds at Record Levels

The large drop in December may have reflected issuers holding off for market volatility to subside, but 2018 was an overall weak year for foreign investment. Net foreign inflows in all securities were down by more than half last year to C$69.6 billion, the lowest since 2013.

A large part of the divestment in foreign bond holdings in December reflected corporate bond retirements that weren’t followed by new issuance. Foreign holdings of Canadian corporate bonds were down C$15.5 billion that month. For all of 2018, foreigners bought a net C$57.6 billion in corporate bonds.

Foreigners also sold government bond holdings in December, with outflows totaling C$9.4 billion. That was part of a year- long decline in foreign interest of federal government debt, which recorded a C$38.2 billion divestment in 2018.

The foreigner sell-off of debt in December wasn’t matched in equity markets, which saw net inflows of C$6.7 billion that month, bringing net investments to C$27.5 billion for the year.

Canadians also showed less interest in foreign investing in December, pulling out C$425 million from securities abroad. For all of 2018, Canadians invested a net C$58.1 billion in foreign securities.

The difference between foreigner investment in Canada and Canadians’ investment abroad was just C$11.4 billion in 2018. That’s down from C$104.5 billion in 2017, and the lowest in 11 years.

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