Foreign investors loaded up on Canadian bonds according to the latest report of International Securities Transactions from Statistics Canada.

Foreign investors added $7.2 billion to their holdings of Canadian securities in August. This is the largest increase since October 2000, says BMO Nesbitt Burns, offsetting the declines of the prior two months. “Non-residents sharply increased their exposure to Canadian bonds and, to a much lesser extent, equities, while decreasing their money market holdings.”

Non-residents picked up $7.8 billion of Canadian bonds, the largest investment since September 1993, says BMO. “Canadian dollar bonds accounted for the lion’s share of the monthly increase, but U.S. dollar issues have attracted the greatest interest year-to-date. Both corporate and federal government bonds attracted foreign buyers, with new issues primarily placed in the U.S. and outstanding issues being favoured by U.K. residents. Non-residents also increased their equity exposure by a modest $457 million, and decreased their money market holdings by $1.1 billion.”

At the same time, after a one-month pause, Canadians returned to foreign markets, buying $1.4 billion of foreign stocks, while continuing to cut back on bonds.