The world's largest sovereign wealth fund, Norway's Government Pension Fund Global, has proposed to slash its holdings of U.S. Treasury bonds by nearly 80 billion U.S. dollars amid growing global unease over America's ballooning debt.
Norges Bank Investment Management (NBIM), which manages the fund, made the recommendation in a letter to Norway's Ministry of Finance on Sept. 4, proposing to reduce the share of government bonds in the fund's fixed-income portfolio from 70 percent to 50 percent, with U.S. Treasuries among the primary targets of the reduction.
The fund currently holds approximately 215 billion dollars in U.S. Treasuries, according to reports. Under the proposal, the allocation to U.S. debt would be cut from 34.1 percent to 21.9 percent of the fixed-income portfolio. The sovereign wealth fund manages total assets of about 2.34 trillion U.S. dollars.
The proposed reduction comes as other major economies have also been trimming their U.S. Treasury holdings. Japan and the United Kingdom sold 26.4 billion dollars and 8.7 billion dollars respectively in June, according to the latest U.S. Treasury data. Turkey effectively liquidated its entire U.S. Treasury holdings in March, while the Netherlands' ABP, one of Europe's largest pension funds, reduced its U.S. bond allocation in the first quarter of this year.
The sell-offs signal growing unease over America's fiscal trajectory. In August, total U.S. federal government debt surpassed 40 trillion dollars for the first time in history, nearly 10 trillion dollars more than the country's GDP last year.
To ease bond market pressure, the U.S. Treasury recently launched long-term bond repurchases aimed at stabilizing yields. But market analysts say the move does little to address the underlying debt problem and may even further erode long-term confidence among overseas investors.
"The new debt is being added to the already existing debt. At the same time, there are no signs that the U.S. government is planning to cut its fiscal deficit. This means U.S. government debt will keep growing. At some point, the situation will become unsustainable," said Fabian Lindner, professor of international economics at Berlin University of Applied Sciences for Engineering and Economics.
Norway's sovereign wealth fund plans major U.S. Treasury sell-off
