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Foreign investors seek haven in Canada
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The Globe and Mail- The debt crises gripping Europe and the United States have prompted the world’s biggest investors to broaden their search for havens in global bonds – and Canada is rising to the top of their list.
Amid festering uncertainty in Europe and the United States, Canada is among a small list of sovereign debt issuers to benefit, as central banks, pension funds and other big money managers diversify their holdings away from some of the traditional foundations of global money markets – the U.S., the euro zone and Japan.
“It’s safe yield in a world where sovereign debt is being called into question. But it’s also attractive yield,” said Tom O’Gorman, director of fixed income at Calgary-based fund company Bissett Investment Management.
That combination is fuelling a pro-Canada trend in the bond market, as foreign investors are drawn to the country’s stable financial system and superior economic potential. For Canadians, the influx of foreign capital is contributing to lower borrowing costs for governments and lower long-term interest rates – but also to an elevated Canadian dollar.
In their hunger to tap into Canada, the world’s central banks are even turning their attention to provincial bonds – a segment of the market most have largely ignored in the past.
“People who buy bonds around the world are snapping up our bonds,” Ontario Finance Minister Dwight Duncan told The Globe and Mail’s editorial board at a meeting Wednesday. “They see our bonds as safer than a lot of nationals. In the old days a lot of central banks wouldn’t buy subnationals, but now they’re doing that.”
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