Norway wealth fund could cut U.S. Treasury holdings by $75 billion

Traders Union
All News
Stocks
Norway fund plans to cut government bonds

Highlights

Norway fund plans to cut government bonds.
U.S. Treasury holdings could fall by $75 billion.
The fund holds over $615 billion in fixed income.
Norway seeks broader returns from riskier debt.

Norges Bank Investment Management proposed lowering the government bond allocation within its fixed-income portfolio to 50% from 70%, Bloomberg reported. The recommendation was submitted to Norway’s Ministry of Finance as part of a broader review of how the fund manages bonds and liquidity.

Fund seeks broader sources of return

The fund held more than $615 billion in fixed-income assets as of June 30, with government bonds accounting for about 59.5% of that amount. Reducing the share to 50% would translate into roughly $58 billion less government debt based on current holdings.

The geographical impact would be uneven. U.S. Treasury holdings could fall by about $75 billion under the proposed structure, while Japanese government bond exposure could increase by approximately $20 billion. Euro-area sovereign holdings would also decline.

Rather than abandoning safe assets, the proposal would leave half of the bond portfolio in government securities while expanding exposure to other fixed-income risk premiums. The fund believes that level would still provide sufficient liquidity during periods of market stress.

NBIM also recommended changing how the government bond benchmark is constructed. Instead of weighting countries according to gross domestic product, it proposed using market values, reflecting the prevalence of high public debt across developed economies.

Bond markets face growing pressure

The proposal comes during a difficult period for sovereign debt. Global bond yields have climbed sharply as investors confront persistent inflation, heavy government borrowing, and expectations of tighter monetary policy.

The U.S. 10-year Treasury yield moved above 4.75% earlier this week for the first time since January 2025. Rising oil prices have reinforced expectations that the Federal Reserve may need higher rates to contain inflation, while concerns about the scale of U.S. government borrowing have increased pressure on longer-term debt.

Government financing needs are also elevated in Japan, Britain, and France, forcing issuers to compete more aggressively for investor capital.

A significant shift for a global investor

The proposal matters because Norway’s fund is one of the world’s largest institutional investors. Changes involving tens of billions of dollars can alter its exposure to individual sovereign markets even without representing a judgment on their creditworthiness.

The planned structure would retain substantial government debt for liquidity while directing more of the $615 billion fixed-income portfolio toward other sources of return. For U.S. Treasuries, the potential $75 billion reduction makes the proposed rebalancing particularly notable as global investors reassess sovereign debt amid higher yields and expanding fiscal deficits.

We have previously highlighted that Japanese bond yields climb to 30-year highs as rate expectations rise.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.