Canadian investors continued to invest heavily in foreign securities in July, acquiring $6.3 billion worth with half going to foreign bonds while the other half was split between foreign shares and short-term paper, Statistics Canada reported on Monday.

As well, after a brief pause in June, foreign purchases of Canadian securities picked up speed. Foreign investors bought $3.2 billion of Canadian securities, mainly bonds.

Building on back-to-back record purchases in the first two quarters, Canadian investors carried on with heavy acquisitions of foreign bonds by buying $3 billion worth in July.

July’s acquisitions of foreign bonds were mainly in overseas bonds, totalling $2.9 billion. On the other hand, purchases of U.S. bonds slowed down significantly, from $2.7 billion in June to only $151 million worth in July.

Canadian investors bought $1.7 billion of foreign money market paper in July, after selling off $864 million the month before. This was the highest level of acquisition since last November. The amount was almost equally split between U.S. government paper, other U.S. paper and overseas paper.

After a brief pull-back in June from consecutive months of strong purchases earlier this year, Canadians resumed their investment in foreign equities, buying $1.6 billion in July. Canadian pension funds were particularly active in acquiring foreign shares.

On a regional basis, Canadians bought $3.2 billion and $1.8 billion respectively from the U.S. and from European Union countries, while selling off $3.4 billion worth of foreign shares to all other regions.

Meanwhile, foreign investors added $4 billion Canadian bonds to their portfolios, the highest value since November 2004.

July’s purchases were concentrated in corporate bonds and provincial government bonds. Investment in federal government and federal government enterprise bonds slowed down to less than half a billion.

Foreign investors purchased $884 million of outstanding Canadian bonds in July, after selling off $1.3 billion in June. However, the principal investment in July came from a sizeable $2.8 billion in net new issues. Canadian provinces and corporations raised funds by issuing bonds mainly in the U.S. market.

U.S. investors alone acquired $8 billion worth of Canadian bonds, the second highest on record. This more than offset a $6.0 billion sell-off by European investors. Investors in other foreign countries were also active in acquiring Canadian bonds in the month. July’s investment in Canadian bonds was mainly U.S. dollar denominated, as a $1 billion increase in bonds denominated in Canadian dollars was offset by the similar reduction in bonds denominated in other foreign currencies.

Foreign investors sold off $2.4 billion in Canadian money market paper in July, after a record purchase of $4.5 billion the month before. This was the highest sell-off of Canadian short-term paper in the past five years. Three-quarters of the divestment was in federally issued paper, both government t-bills and paper issued by federal enterprises.

The swing came largely from American investors who sold off $1.8 billion in Canadian paper in July after a near record purchase of $3.8 billion the month before. In July, the differential on short-term rates between the United States and Canada climbed to its highest value in almost a decade, still favouring investment in the United States.

Non-residents bought $1.6 billion in Canadian equities in July, almost all outstanding shares. Shares of Canadian manufacturing, mining and investment intermediaries were top picks.

Purchases of Canadian shares have been strong since January 2006. Heavy purchases have occurred in five out of the past seven months amounting to $18.6 billion so far in 2006.

Geographically, American and British investors bought $1.6 billion and $1 billion respectively of Canadian shares, while investors from other foreign countries sold off some of their holdings.