Norway Proposes $80 Billion Sell-Off of US Treasuries Amid Inflation Fears

Norway's Government Pension Fund Global (GPFG), the world's largest sovereign wealth fund, has proposed reducing its weighting of U.S. Treasuries in its bond portfolio by 12.2 percentage points. The plan, which would involve selling $80 billion worth of U.S. Treasuries, is based on simulations showing that even a lower government bond weighting of 40% would be sufficient to meet liquidity needs during times of financial market instability.

The proposal also calls for restructuring the remaining half of the bond index to provide exposure to a more diverse range of risk premium sources, including securitized bonds and government-related bonds. Securitized bonds refer to mortgage-backed securities (MBS) guaranteed by quasi-government agencies such as Fannie Mae and Freddie Mac in the United States.

The weighting of U.S. Treasuries would decline from 70% to 50%, while the weighting of non-government U.S. bonds would increase by 11.4 percentage points. The fund's global government bond holdings would decrease by $106 billion, with $80 billion attributable to U.S. Treasury sales.

NBIM emphasized that despite concerns raised by lawmakers about the fund's exposure to U.S. assets, its exposure to U.S. dollar-denominated assets would remain essentially unchanged even if the proposal were implemented.