Norway's sovereign wealth fund proposes trimming U.S. Treasury exposure
Norges Bank Investment Management, manager of the world’s largest sovereign wealth fund with $2.3 trillion in assets, has proposed reducing its exposure to U.S. Treasuries while shifting more of its bond portfolio toward riskier U.S. debt, including mortgage-backed securities. Rebalancing Toward Agency MBS In a letter to Norway’s finance ministry Tuesday, Norges Bank recommended cutting the government debt share of its benchmark bond index to 50% from 70%. The change would reduce the fund’s U.S. Treasury allocation by 12.2 percentage points, equivalent to roughly $80 billion. The Treasury reduction would largely be offset by increased allocations to non-government U.S. debt, including agency mortgage-backed securities. Fund Favors Agency Mortgage-Backed Securities Norges Bank said MBS carry risks beyond credit losses because borrowers can refinance when interest rates fall, allowing t...
S. S. debt, including mortgage-backed securities. Rebalancing Toward Agency MBS In a letter to Norway’s finance ministry Tuesday, Norges Bank recommended cutting the government debt share of its benchmark bond index to 50% from 70%.
S. 2 percentage points, equivalent to roughly $80 billion. S. debt, including agency mortgage-backed securities.
Fund Favors Agency Mortgage-Backed Securities Norges Bank said MBS carry risks beyond credit losses because borrowers can refinance when interest rates fall, allowing them to repay mortgages early and leaving investors to reinvest at lower yields. Investors therefore demand compensation for the prepayment risk. The fund said securitized bonds, including agency MBS, should be included in the benchmark because they provide exposure to additional risk premiums and create a more diversified portfolio. S.
government bonds, according to Norges Bank. S. S. 1%.
6%. K. 2%. 9% currently.
Norges Bank Governor Ida Wolden Bache and CEO Nicolai Tangen said a 50% government-bond allocation would remain sufficient to meet liquidity needs during periods of financial-market turbulence. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published editors. Read Also: Scott Bessent's Notepad Was Accidentally Photographed At Camp David— and It Shows a Plan to Buy Up To $10 Billion in Japanese Yen Image via Shutterstock