FDI flows remain moderate, while foreign flows into Canadian debt securities hit a record.

Canada’s balance of international payments release has two main components: the current account (trade in goods and services, income flows and transfers) and the financial account (portfolio and direct investment flows). This note focuses on the financial account.

Direct Investment

• Foreign direct investment (FDI) into Canada accelerated to $25.8 billion in Q2, bringing first-half 2026 inflows to $44.7 billion, below the $54.7 billion recorded over the same period in 2025.
• U.S. direct investment remained strong at $12.4 billion in Q2, bringing first-half inflows to $31.4 billion - $4 billion above the same period last year.  M&A activity was the biggest driver, while reinvested earnings also remained healthy.
• Energy and mining remained the leading sector over the first half of the year, with flows roughly $6 billion higher than last year. Manufacturing also saw a welcome pickup in FDI in Q2.
• In contrast, Canadian direct investment abroad slowed to roughly $17 billion in Q2, bringing first-half flows to $60.7 billion - $22 billion higher than same time last year.  Flows into the U.S. led the increase, primarily through M&A activity.
  
   

Portfolio Investment

• Foreign investors continued to add to their holdings of Canadian government and corporate debt securities in Q2 following a strong Q1, with inflows reaching a record of $110.2 billion. Total portfolio inflows reached $100.6 billion in Q2 and $157.8 billion in the first half of the year – a sharp reversal from the contraction of $23 billion same time last year. This suggests that foreign appetite for Canadian assets remains strong, though demand continues to favour debt over equities.
• Canadian purchases of foreign securities totalled $45.6 billion in Q2, bringing first-half investment to roughly $86 billion, up about 45% from a year earlier. Canadians continued to buy U.S. equities while net purchases U.S. debt securities remained relatively healthy in Q2 but slowed compared with the first half of last year. 
• Hidden within the overall debt flows is an unprecedented $20 billion jump in Canadian net acquisitions of foreign securities denominated in Canadian dollars – so called Maple bonds – driven by large issuances from Alphabet and Amazon.

Key Implications

• FDI into Canada has moderated from last year’s pace but remains relatively strong. The U.S. re-emerged as the leading source of investment in the first half of 2026, although this partly represents a rebound from last year’s sharp slowdown.  Investment from non-U.S. countries has slowed over the past three quarters, but given the volatility in this data, we wouldn’t read too much into this yet. We will be watching this data closely in the coming months to see if Canada's investment summit in mid-September is successful. With more than $1 trillion in announced projects, Canada is at a potential inflection point that, if played right, could propel the country into an investment “supercycle” lasting for a decade or longer.
• Foreign demand for Canadian portfolio securities is already robust and, unlike FDI, is increasingly coming from outside the United States. Debt has been the clear standout, with both government and corporate bonds attracting some of the largest inflows in recent years. This is encouraging, suggesting that Canadian debt securities remain attractive at a time when it needs to raise more capital. 
  
   

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