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4h ago

Norway Fund Proposes Major Cut to U.S. Treasury Holdings

The recommendation seeks to free capital for higher‑yield corporate and mortgage‑backed debt to lower concentration and liquidity risk.

Norges Bank IM says the biggest change to its bond index would be investing in more non-government debt, including mortgage-backed securities, to give it better diversification and exposure to risk premiums.
Following the proposed rebalancing, the fund would see its holdings of U.S. Treasuries trimmed by 12.2 percentage points, while the share of non-government U.S. debt would jump by 11.4 percentage points.
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Overview

  • Norges Bank Investment Management formally recommended reducing the government‑bond share of its benchmark from 70% to 50%, a change it presented to Norway’s finance ministry on Sept. 4.
  • Under the plan the fund would cut its U.S. Treasury weight in the government subindex from 34.1% to 21.9% and raise U.S. non‑government fixed income such as agency mortgage‑backed securities and corporate bonds from 16.2% to 27.6%.
  • Analysts and reporters translate the allocation shifts into roughly $75–80 billion of potential Treasury sales and as much as about $106 billion of total government‑bond reductions, though NBIM says any trades would be phased in to limit market disruption.
  • The proposal would also change the government‑bond weighting method from GDP‑based metrics to market‑value weighting so the index better reflects the actual size of sovereign debt markets.
  • The plan must pass an expert council review expected by January 2027, enter the government white paper and parliamentary hearings in spring 2027, and only then be implemented gradually, a process that could influence Treasury demand and borrowing costs if approved.