In May, risk-weary investors turned north for a safe haven in light of the sovereign debt crisis in Europe, uncertainty over the US raising the debt ceiling, and low yields on US Treasury bills.Foreigners doubled their purchases of Canadian bonds between April and May, according to statistics released by the Canadian government this morning.
The report also pointed out that for the third straight month, Canadians have been dumping longer-term US securities in favour of maple bonds and US and Japanese stocks.
Most of the investment in Canadian bonds came from the US. Investors from the UK and Asia sharply increased their holdings of Canadian debt in May.
This underscores a broader point: There’s a huge interest in fiscally-sound, commodity-backed, and relatively isolated government paper, whether it’s in Canada the Scandinavian Countries, or Swiss Franc right now. As long as the US and Europe are seen as wracked with debt problems, this trend will probably continue.