Norway’s Sovereign Wealth Fund Plans to Trim U.S. Treasury Holdings

Norges Bank Investment Management (NBIM), which manages Norway’s $2.3 trillion sovereign wealth fund, has sent a letter to the Norwegian Finance Ministry outlining a plan to lower the share of its bond portfolio allocated to government securities. The fund seeks to cut the “government sub-index” from 70 % to 50 %, which would reduce its holdings of U.S. Treasurys from roughly 34 % of the portfolio to about 22 %. At the same time, NBIM proposes to lower its euro-area bond exposure from 16.8 % to 14.1 % and raise its allocation to Japanese government bonds from 4.6 % to 7.4 %.

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NBIM argues that a smaller government-bond slice will preserve liquidity during periods of market turbulence while allowing the fund to pursue higher returns in other asset classes. The timing coincides with a volatile Treasury market, where long-dated yields have risen to decade-high levels amid concerns over the United States’ fiscal trajectory and growing debt burden.

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• Total portfolio value: $2.3 trillion.

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• Current Treasury share: 34.1 % -> proposed 21.9 %.

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• Euro-area bond share: 16.8 % -> proposed 14.1 %.

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• Japanese government bond share: 4.6 % -> proposed 7.4 %.

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• Government-bond sub-index target: 70 % -> 50 %.

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Economist Mohamed El-Erian, speaking to CNBC’s Carolin Roth, noted that traditional large-scale buyers of U.S. Treasurys are under pressure and that the fund’s move, while modest in size, sends an important signal about the reliability of established holders.

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“The size isn't big, but the signal that traditional holders and buyers are becoming less reliable is a very important one.” — Mohamed El-Erian, economist

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