Statistics Canada today reported Canada’s net external liabilities declined by 8.4% from the previous quarter and represented a record low 10.9% of gross domestic product.

Net external liabilities totalled $154.3 billion at the end of March, down $14.2 billion from the end of 2005.

The value of international assets totalled $1.053 trillion, up 3.6% from the previous quarter.

The agency attributed the increase to gains in direct investment abroad and bigger holdings of foreign bonds.

International liabilities reached $1.207 trillion, up 1%.

This was mostly due to increased in foreign direct investment in Canada.

Net external liabilities at the end of March represented a record low 10.9% of GDP, down a percentage point from the end of December. At the end of 2002 the ratio was 17.6% of GDP.

The volatile dollar played a small role in the changes to net liabilities.

The dollar depreciated slightly against all major foreign currencies in the first quarter and this increased the value of international assets and foreign liabilities by $7.6 billion and $2.6 billion respectively.

When the Canadian dollar rises in value, the restatement of the value of these assets and liabilities in Canadian dollars lowers the recorded value. The opposite is true when the dollar is depreciating.

Canadians bought more foreign bonds during the first quarter, with the strongest quarterly jump on record.

Canadian holdings of foreign bonds rose $10.4 billion to a record $92.8 billion at the end of the quarter..

Holdings of American bonds rose 11%, while holdings of overseas bonds rose 18%.

The total Canadian holdings of stocks, bonds and money market paper abroad reached $300.8 billion at the end of March. This was 29% of Canada’s international assets.

Holdings of foreign stocks reached $193.9 billion, up $4.7 billion from the end of 2005, as Canadians purchased more American shares.

Stock holdings represented 65% of total Canadian portfolio investment abroad at the end of the first quarter.

Canadian direct investment abroad rose $12.7 billion during the quarter to $477.8 billion.

Foreign direct investment in Canada rose $8.6 billion to $424.2 billion at the end of March. Two thirds of that was American investment.

Foreign holdings of Canadian stocks increased $2.7 billion to $110.3 billion at the end of the quarter, with American investors holding 90% of the total.

Foreign investors snapped up Canadian money market paper for a second consecutive quarter. Foreign holdings of Canadian money market paper increased $2.1 billion to $22.9 billion.