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Norway’s Wealth Fund Proposes Major Cut to U.S. Treasury Exposure

From Asharq Al-Awsat · () English

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

At a glance

News Documents & data New plan
  • Norges Bank Investment Management proposed cutting government bonds’ share of Norway’s wealth fund benchmark from 70% to 50%.
  • The plan could reduce U.S. Treasury holdings by nearly $80 billion from about $215 billion, according to Reuters calculations.
  • The fund also proposed greater exposure to non-government debt and potentially more unlisted assets, with any changes expected to occur gradually and no earlier than several months into 2027.

Norway’s $2.3 trillion sovereign wealth fund could cut nearly $80 billion from its U.S. Treasury holdings under a proposed overhaul of its bond investments. The reduction would bring its Treasury holdings down from about $215 billion, based on Reuters calculations.

Norges Bank Investment Management has recommended reducing the share of government bonds in its benchmark bond index to 50% from 70%. U.S. Treasuries, currently the fund’s largest holding, would face the biggest reduction.

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 the wealth fund’s chief executive stated the proposed change to the fund’s bond benchmark.

The proposal responds to pressure in government bond markets, where long-term borrowing costs have risen as investors have focused on inflation and high government debt levels. Because Norway’s fund is the world’s largest and owns an average 1.5% of all listed companies globally, its portfolio decisions can affect wider market flows.

“We recommend that the government subindex of the bond index be reduced from 70% to 50%,” Norges Bank Governor Ida Wolden Bache and fund chief executive Nicolai Tangen wrote in a letter. “A government share of 50% will be sufficient to cover the liquidity needs, including in periods of turbulence in financial markets.”

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 considers a smaller government-bond allocation adequate.

The fund said it would wait for the Finance Ministry’s response and implement any changes gradually to limit market effects and transaction costs. The proposals will contribute to recommendations due to the ministry in January, enter the annual white paper process next spring, and eventually go to Parliament for a hearing.

The fund also proposed considering more investment in unlisted assets to reduce concentration risks in its equity portfolio, which have increased amid rising shares of a small group of U.S. technology companies. Its bond strategy would place greater emphasis on non-government debt, including mortgage-backed securities. Total U.S. dollar exposure would remain around 50%, but the mix would shift toward U.S. mortgage and government-related bonds rather than Treasury debt.

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 proposed reduction in Treasury exposure would affect the fund’s dollar investments.
About this summary

Originally published by Asharq Al-Awsat in English. 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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