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🇦🇹 Austria /Economy & Trade

Norway’s sovereign wealth fund plans major cut in US Treasury holdings

From Die Presse · () German

Translated from German and summarized by DistantNews. Read the original for the full story.

At a glance

Newswire From a news agency New plan
  • Norges Bank Investment Management recommended cutting government bonds’ share of the fund’s benchmark index from 70% to 50%.
  • Reuters calculations indicate the change could reduce US Treasury holdings by nearly $80 billion from about $215 billion at the end of June.
  • The fund said the move would diversify its dollar assets, not reduce its overall exposure to the US currency.

Norway’s $2.3 trillion sovereign wealth fund is preparing to reduce its holdings of US government debt in a portfolio shift aimed at improving returns.

Norges Bank Investment Management recommended lowering government bonds’ share of the fund’s benchmark index from 70% to 50%, according to a letter disclosed on Friday. Reuters calculations indicate that the change could mean selling nearly $80 billion in US Treasuries, compared with holdings of about $215 billion at the end of June.

We recommend lowering the government bond share in the bond index from 70% to 50%.

· Ida Wolden Bache and Nicolai TangenTheir recommendation to adjust the fund’s benchmark allocation.

The fund’s decision could affect bond markets. Government debt markets have faced pressure from rising inflation and heavy public borrowing, while US government debt has passed $40 trillion for the first time. The fund owns an average of 1.5% of companies listed worldwide.

The proposal followed a request from Norway’s Finance Ministry about the fund’s investment strategy. Central bank governor Ida Wolden Bache and NBIM chief Nicolai Tangen wrote that a 50% government-bond share would still cover liquidity needs during turbulent market conditions. They said any changes would happen gradually to limit market effects and transaction costs.

A government bond share of 50% will be sufficient to cover liquidity needs even during turbulent market conditions.

· Ida Wolden Bache and Nicolai TangenTheir justification for reducing the government-bond allocation.

The released capital would mainly move into other types of bonds, including mortgage-backed securities. NBIM said the plan did not represent a retreat from the US dollar. Dollar-based assets would remain close to 50% of the portfolio, with less held in Treasuries and more in US mortgage and government-related bonds.

Under the proposal, US Treasuries would fall from 34.1% to 21.9% of the index, while non-government US bonds would rise from 16.2% to 27.6%. The total dollar share would change only slightly, from 52.9% to 52.5%.

What is changing is the mix within the dollar market: fewer US Treasuries, correspondingly more US mortgage and government-related bonds.

· NBIM spokespersonThe explanation that the shift would diversify dollar assets rather than reduce dollar exposure.
About this summary

Originally published by Die Presse in German. Translated, 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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