World’s largest sovereign wealth fund to exit government bonds after global sell-off – Youm7
Norway’s government pension fund, the world’s largest sovereign wealth fund, plans to reduce its holdings of government bonds by about 90 billion pounds amid growing concerns about public financial conditions and rising levels of public debt.
The British newspaper “The Telegraph” reports that the fund, which is worth about 21.8 trillion Norwegian kroner (1.7 trillion British pounds), is considering reducing the percentage of government bonds in the portfolio from the current 70% to 50%.
In a letter to the Norwegian Ministry of Finance, the administration explained that the reduction in the share of government bonds will allow the funds obtained from sales operations to be directed to riskier assets, which will help to increase income in the long term.
The trend comes as global bond markets have seen a sharp sell-off, with government borrowing costs rising in a number of major economies as governments expand borrowing and raise debt levels that exceed gross domestic product in economies including the United States, France and Japan.
Norway’s global government pension fund, known as the “oil fund”, is one of the largest investors in global markets, as it owns shares in around 1.5% of global listed companies.
A reduction in the Fund’s holdings of government bonds may increase borrowing costs. Reduced demand for debt instruments may prompt investors to demand higher yields.
Government borrowing costs rose sharply this week as British 10-year yields hit their highest level since 2007 and the British Treasury on Thursday offered the highest yield on inflation-linked bonds since 2001.
In the United States, the 10-year Treasury yield exceeded 4.75% on Monday for the first time since January 2025 amid high inflation, fiscal policy and the national debt, which last month topped $40 trillion for the first time.
Under Norway’s proposal, the share of British debt in the fund’s portfolio will remain at around 4.2%, while the share of American debt will be reduced from 34.1% to 21.9% of the total portfolio of government bonds.
Nicholas Bickel, chief investment officer at Edmond de Rothschild, said the impact of the move could be significant given the message it sends about holding US Treasuries in long-term investment portfolios.
He added that the volatile inflation and fiscal policy environment will continue to influence long-term interest rates and expects them to remain high for a longer period.
For his part, Carmignac investment committee member Kevin Toucet said the Norwegian oil fund is unlikely to rush to sell US Treasuries, suggesting that holdings will be reduced gradually and gradually.
He noted that the move reflects a long-term trend, explaining that sovereign bond markets in advanced economies, particularly the US market, have seen very weak returns for more than five years.