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From Asharq Al-Awsat · () English

Summarized by DistantNews. Read the original for the full story.

At a glance

News Named sources New plan
  • Norway’s sovereign wealth fund has proposed cutting government bonds to 50% of its benchmark bond index from 70%, with U.S. Treasuries facing the largest reduction.
  • The changes could remove nearly $80 billion from the fund’s roughly $215 billion in U.S. Treasury holdings, although implementation would not begin until at least several months into 2027.
  • Norges Bank Investment Management also proposed increasing exposure to non-government debt and potentially unlisted assets to improve diversification and returns.

Norway’s $2.3 trillion sovereign wealth fund wants to sharply reduce its exposure to U.S. Treasuries as part of a broader overhaul of its bond investments aimed at improving returns.

Norges Bank Investment Management recommended cutting the government-bond share of the fund’s benchmark bond index to 50% from 70%. U.S. Treasuries, currently the index’s largest holding, would take the biggest cut. Based on the fund’s holdings at the end of June, the change would reduce its U.S. Treasury position by nearly $80 billion from about $215 billion, according to Reuters calculations.

We recommend that the government subindex of the bond index be reduced from 70% to 50%.

· Ida Wolden Bache and Nicolai TangenThe Norges Bank governor and Norges Bank Investment Management chief outlined the proposed reduction in government bonds.

The proposal comes as government bond markets face pressure. Longer-term borrowing costs have risen as higher inflation and growing government debt have unsettled investors. Because the Norwegian fund is the world’s largest and owns an average 1.5% of all listed companies globally, changes to its portfolio could affect wider market flows.

A government share of 50% will be sufficient to cover the liquidity needs, including in periods of turbulence in financial markets.

· Ida Wolden Bache and Nicolai TangenThe letter explained why the fund believes a smaller government-bond allocation would remain adequate.

The fund said any changes would be introduced gradually to limit market disruption and transaction costs. It will wait for a response from Norway’s finance ministry, with recommendations due in January. The proposals will then be discussed through the fund’s annual white paper process next spring before the ministry makes a final recommendation to parliament.

The proposed bond-index changes would shift more money into non-government debt, including mortgage-backed securities, to improve diversification and gain exposure to risk premiums. The fund said its overall U.S. dollar exposure would remain around 50%, but the mix would change, with less U.S. government debt and more U.S. mortgage and government-related bonds. It is also considering increasing investments in unlisted assets to reduce concentration risks linked to a small group of U.S. technology companies.

What changes is the mix inside the dollar market: less US government debt, correspondingly more US mortgage and government-related bonds.

· Norges Bank Investment Management spokespersonThe spokesperson described how the fund would alter its dollar-denominated bond holdings.
About this summary

Originally published by Asharq Al-Awsat. Summarized and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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