Norway’s sovereign wealth fund proposes €72bn ($80bn) cut to US Treasury holdings

Norges Bank Investment Management (NBIM), manager of the world’s largest sovereign wealth fund, proposed slashing its government bond allocation from 70% to 50% of its bond portfolio. The biggest reduction targets US Treasuries, which would drop from 34.1% to 21.9% of bonds, a cut of roughly €72bn ($80bn). The shift, aimed at boosting returns via riskier assets like mortgage-backed securities, could signal waning demand for US debt among major institutional investors.

Bottom line — NBIM’s proposal would reduce its US Treasury holdings by €72bn, reflecting a broader move away from government bonds by the world’s largest sovereign wealth fund.

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• The fund currently holds about €554bn ($592bn) in fixed income, with 69% in government and government-related bonds as of 30 June, per NBIM data.
• Under the plan, euro area government bonds would fall from 16.8% to 14.1% of the bond index, while Japanese government bonds would rise from 4.6% to 7.4%, according to NBIM’s letter to the Finance Ministry.
• Total US dollar exposure would stay near 50%, but the mix shifts: less US government debt, more US mortgage-backed securities and government-related bonds, NBIM said.
• NBIM also proposed increasing unlisted assets in a separate letter, citing concentration risk from the boom in a handful of US tech stocks, the fund said.
• Economist Mohamed El-Erian told CNBC the move is small in size but the signal that traditional holders of US Treasuries are becoming less reliable is important.
• Any changes require approval by Norway’s parliament and are unlikely before 2027, NBIM said, with gradual implementation to limit market disruption.
• The Dutch pension fund ABP also cut its US Treasury holdings earlier this year, Reuters reported.
• NBIM CEO Nicolai Tangen and central bank governor Ida Wolden Bache said a 50% government bond share still provides sufficient liquidity even during market turbulence.

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