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
U.S. Democratic Senator Chris Murphy said on Tuesday that the Pentagon had barred him from entering a key U.S. military base during his recent visit to Qatar, which he said reflected an effort by the U.S. government to conceal the costs of the conflict with Iran.
Murphy made the remarks while visiting Riyadh, capital city of Saudi Arabia, the second stop on his current trip to the Middle East.
He told reporters that the trip had reinforced his belief that the U.S. administration was making an unprecedented and unconstitutional effort to withhold information about the war's costs and consequences from Congress and the American public.
The United States and Israel launched military strikes against Iran in late February, prompting Iranian retaliation against U.S. military installations across the Middle East. Al Udeid Air Base, southwest of Qatar's capital Doha and one of the largest U.S. military facilities in the region, was among the major targets of the Iranian attacks.
A September 14 report by the U.S. Defense Department's inspector general, Office of Inspector General of the U.S. Department of Defense (DoDIG), said the conflict had caused significant damage to U.S. military bases and diplomatic facilities across the region, with hundreds of buildings and other structures damaged or destroyed and more than 50 U.S. aircraft damaged or destroyed.
Members of Congress have repeatedly called on the administration to provide more information about the financial costs and casualties resulting from the conflict.
Murphy, who serves on the Senate Foreign Relations Committee, said he had never encountered such restrictions during his time in the Senate when discussing the Pentagon's decision to prevent him from accessing the U.S. military facility in the Middle East.
During his visit to Saudi Arabia, Murphy also saw extensive damage to the U.S. Embassy in Riyadh caused by a drone attack. He warned that the incident could have resulted in mass casualties had it occurred during working hours.
According to data from the Defense Casualty Analysis System of the U.S.Department of Defense, U.S. forces had recorded 838 casualties in the conflict as of September 8, including 18 deaths and 820 injuries.
The Pentagon has faced criticism over delays in releasing information about wounded U.S. service members during the conflict, while officials have cited security concerns as the reason for withholding or delaying some details.
US senator accuses government of concealing Iran war costs
