Foreign investors increased their holdings of Canadian securities in August by $897 million, Statistics Canada announced today.

While foreign investors continued to invest in Canadian bonds and stocks, they sold off a substantial amount of money market paper, the government agency said.

Meanwhile, Canadian investors sold off $1.1 billion in foreign securities, as they divested roughly an equal amount of foreign stocks and bonds, StatsCan said.

For the second consecutive month, foreign investors reduced their holdings of Canadian money market paper. The foreign divestment in August totalled $1.9 billion, the largest sell-off of Canadian money market paper since February 2001, StatsCan said.

U.S. investors were the leading sellers in August, offloading $1.8 billion worth of Canadian money market paper—their largest divestment since February 2001. StatsCan noted that the gap between Canadian and U.S. short-term interest rates narrowed to 0.65% in August –its lowest level in almost two and a half years.

Canadian investors reduced their holdings of foreign bonds by $601 million in August. The reduction was entirely in U.S. treasuries as Canadian investors sold off $1.7 billion. Mostly offsetting this however was the purchase of $1.1 billion in overseas bonds—the biggest one-month investment in overseas bonds ever.

StatsCan said Canadian investors’ strong interest in overseas bonds was in contrast to their continued selling of overseas stocks. Canadian investors sold off a further $882 million worth in August. They did however purchase $374 million in U.S. equities resulting in net sales of $509 million in foreign equities.