International traders’ enthusiasm for Canadian bonds continued its fast tempo in Could, with year-to-date acquisitions of Authorities of Canada bonds at a document excessive, in accordance with the most recent Statistics Canada information.
Web overseas funding in Canadian securities was $20.9 billion in Could, marking the third straight month of internet inflows. 12 months-to-date purchases of Authorities of Canada (GoC) bonds by world traders have reached an unprecedented $49.7 billion.
The GoC bond buy document comes amid a common frenzy for Canadian bonds each authorities and company. 12 months-to-date purchases reached $110 billion, the second-highest complete on document. The 2024 quantity, Nationwide Financial institution Monetary Markets charges strategists Warren Pretty and Taylor Schleich word, is “only trailing the once-in-a-generation debt issuance binge of 2020.”
Canadian traders, in the meantime, purchased a internet $3.9 billion price of worldwide securities in Could, following an April the place retreating markets noticed Canadians promote $11.6 billion of overseas equities and a internet overseas funding simply above zero.
Canadians spent $3.8 billion on overseas bonds and $2.6 billion price of U.S. shares in Could however offered off $1.9 billion price of different overseas shares.
Round two-thirds of the $19.6 billion complete overseas spend on Canadian bonds in Could was on GoC bonds, the most important quantity this 12 months. “In the 12-month period to May 24, non-residents absorbed more GoCs than all domestic investors combined,” Pretty and Schleich wrote.
“This has the non-resident ownership share of GoC bonds climbing steadily, topping 36 per cent and edging ever closer to a record ownership share.”
Although some threat accompanies overseas possession, Pretty and Schleich write that the “broader and deeper non-resident interest increasingly on display seems to us a vital source of secondary bond market liquidity.”
The concentrate on GoC bonds has been “fortuitous,” Pretty and Schleich say, due to the Financial institution of Canada’s present quantitative tightening efforts, during which it has been decreasing its bond holdings after shopping for up vital quantities throughout the pandemic.
The BoC’s footprint within the GoC market is over two-thirds of the best way again to its pre-pandemic dimension, Pretty and Schleich write. Lower than three years in the past, the BoC owned 43 per cent of the market, they are saying, however the central financial institution’s share is now approaching 20 per cent.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Observe him on Twitter @jmacf. Obtain the Yahoo Finance app, accessible for Apple and Android.
