Canadians bought $12.3 billion in August, the second highest level on record, Statistics Canada reported today.

This drove the total purchases over the first eight months of 2006 to $58.8 billion, close to the record annual purchase of $63.9 billion in 2000.

Investment in foreign bonds accounted for over half of the year-to-date purchases, compared to only 6% in 2000.

Acquisitions of Canadian securities by non-residents, on the other hand, cooled down significantly to $335 million in August.

This was a significant pull-back from months of strong purchases earlier in 2006. Investments were reduced to moderate levels for both debt instruments and equities.

Canadian investors extended the trend of heavy acquisitions of foreign bonds in August. The $4.9 billion of purchases over the month pushed the total amount so far in 2006 to $31.2 billion, surpassing the record annual purchase of $27.6 billion in 2005.

Over half of August’s investment went to buy U.S. government bonds.

In August, Canadian investors acquired a record $2.2 billion of foreign money market paper, after adding $1.7 billion in July.

Canadian investors posted the 19th straight month of foreign equity purchases in August. They acquired $5.1 billion worth over the month, up from the previous two months. The purchases totalled $23.9 billion over the first eight months of 2006, exceeding the annual buying of any of the previous four years.

While a sizable $1.9 billion was invested in US stocks, nearly double the amount went to acquire overseas shares in August. August’s heavy purchases were driven by investment by Canadian pension funds.

Non-resident investors decreased their holdings of Canadian bonds by $788 million in August, after adding $4 billion the month before. Two-thirds of the sell-offs were in outstanding Canadian bonds. In August, Canadian long-term rates not only lagged behind US rates, but also dropped below Canadian short-term rates.

August’s dispositions were concentrated in federal government bonds, slashing $3 billion of foreign holdings. This more than offset a $1.9 billion foreign acquisition of federal enterprise bonds and corporate bonds.