Norway’s Wealth Fund Proposes Cutting Nearly $80 Billion of U.S. Treasuries

Norges Bank Investment Management (NBIM), manager of Norway’s Government Pension Fund Global, has recommended a major redesign of the fund’s fixed-income benchmark. The key change is a reduction in the government-bond subindex from 70% to 50%, paired with a move from GDP-based to market-value-based sovereign weights. If adopted, the change is estimated to reduce the fund’s U.S. Treasury exposure by nearly $80 billion. It is a recommendation to Norway’s finance ministry—not an announced one-day Treasury sale. 133

What would change

Today, the benchmark assigns 70% of fixed income to government and related bonds and 30% to corporate and related debt. NBIM recommends a 50/50 split instead, arguing that the lower government-bond allocation would still meet liquidity needs in periods of financial-market turbulence while expanding the portfolio’s sources of expected return. 17

The proposal also replaces GDP-based country adjustments in the government-bond sleeve with market-value weights. Under reported estimates of the proposed benchmark, U.S. Treasuries would fall from 34.1% to 21.9% of that sleeve. Reuters calculated that the combined changes would imply a reduction of nearly $80 billion in Treasury holdings. 3349

The allocation would not simply move into cash. Reporting on the proposal indicates greater exposure to corporate credit and mortgage- or asset-backed securities, a smaller euro-area sovereign allocation, a larger Japanese government-bond allocation, and broadly retained UK exposure. 3848

Why move away from GDP weights?

GDP weighting was designed in part to prevent a country from receiving a larger benchmark allocation merely because it issued more debt. Under market-value weighting, by contrast, a country’s index weight rises with the value of its bond market. NBIM now argues that high government debt is a broad feature of developed markets rather than an exceptional feature of a small set of countries, making market-value weighting more appropriate for the benchmark. 111

That is a meaningful trade-off. Market-value weighting is closer to the investable bond market, but it also mechanically gives the largest borrowers the largest weights. The proposed reduction in the overall government allocation limits how much that feature dominates the fund’s fixed-income portfolio. 111

Why NBIM says 50% is still enough in a crisis

Government bonds would remain half of the benchmark and continue to provide the fund’s liquid reserve. NBIM explicitly says that a 50% government share would be sufficient to cover liquidity needs, including during turbulent markets. 1

The other half would pursue higher expected returns through non-government debt. That can improve long-run return potential, but it also means accepting more credit risk and potentially less liquidity than in highly liquid sovereign bonds. The proposal is therefore not a rejection of Treasuries or government debt; it is an attempt to retain a substantial defensive allocation while reducing the bond portfolio’s dependence on it.

What happens next—and why the $80 billion is not a sale order

NBIM has submitted advice to Norway’s Ministry of Finance. The existing mandate specifies a 70% government and 30% corporate split, so implementation would require a change to the benchmark framework rather than a routine portfolio trade. 7

No execution timetable is established in the cited proposal. If authorities approve the changes, the resulting repositioning would depend on the adopted benchmark and portfolio implementation. The widely cited nearly $80 billion figure is an estimate of the portfolio implication, not confirmation of an immediate disposal. 33

Why Mohamed El-Erian sees a broader Treasury-market signal

Mohamed El-Erian has argued that global government-bond selling may continue because the United States lacks appetite for immediate fiscal consolidation, leaving yields under upward pressure. He has also pointed to stress on the traditional base of reliable Treasury buyers. 50

Against that backdrop, Norway’s proposal is notable less because its estimated sales could independently disrupt the vast Treasury market and more because it illustrates a large, conservative investor seeking less exposure to sovereign debt. If similar reallocations became more widespread, governments could need to offer higher yields to attract sufficient demand. That is a warning about the durability of marginal demand, not a prediction of an imminent Treasury-market breakdown. 50

Separate from, but consistent with, the fund’s broader risk debate

The bond proposal addresses fixed-income structure, while the fund’s equity risks are different. In the first quarter of 2025, the fund reported a 415 billion kroner loss, about $40 billion, and said weak technology-sector returns weighed on equity performance. 25

NBIM chief executive Nicolai Tangen has also warned that the fund could suffer exceptionally severe losses in a market collapse. 46 The common thread is resilience: the fund is examining whether its long-term portfolio is too reliant on a narrow set of return drivers. But a larger allocation to credit or other less-liquid assets cannot replace the crisis-liquidity role that NBIM says its remaining government-bond allocation must preserve. 1