Norway's wealth fund eyes shift from Treasuries to riskier U.S. debt
Norges Bank Investment Management recommended reducing its U.S. Treasury holdings by $80 billion and increasing exposure to mortgage-backed securities and other government-related debt. The proposed rebalancing would keep overall dollar-denominated assets roughly unchanged at about 52.5%. The fund cited the need for broader risk premiums and diversification, though the move comes amid rising U.S. fiscal and geopolitical concerns.
The proposed shift would cut U.S. government bonds within the benchmark from 34.1% to 21.9%, while non-government U.S. debt rises by 11.4 percentage points. The fund notes that mortgage-backed securities carry prepayment risk rather than default risk, and are guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae.
Geographically, euro zone government debt would dip to 14.1% from 16.8%, while Japanese holdings increase to 7.4% from 4.6%, leaving the UK steady at 4.2%. Overall, the benchmark's government bond weighting falls from 70% to 50%, a level the fund's leaders say remains sufficient for liquidity during market turbulence.
This rebalancing could signal to global investors that even the largest sovereign funds are hedging against U.S. fiscal and geopolitical risks. If other institutions follow, U.S. Treasury yields may rise, increasing federal borrowing costs. Conversely, increased demand for mortgage-backed securities could support housing finance markets. The move also reinforces a gradual shift toward gold and other currencies, potentially reshaping global reserve dynamics over time.