Norway’s $2.3 trillion sovereign wealth fund has proposed a significant reduction in its government bond holdings, a move that would primarily impact its allocation of U.S. Treasurys. The proposal, detailed in a letter from Norges Bank Investment Management (NBIM) to the country’s Finance Ministry and made public on Friday, September 4, 2026, aims to diversify risk exposure and enhance long-term returns.
Under the recommended strategy, NBIM proposes cutting the government subindex of its fixed-income portfolio from 70% to 50%. According to the fund’s leadership, this adjusted level would maintain sufficient liquidity during periods of market turbulence while allowing the fund to seek higher yields elsewhere. If approved by the Finance Ministry, the reallocation would gradually reduce the fund’s U.S. Treasury holdings from 34.1% to 21.9% and its Eurozone sovereign debt from 16.8% to 14.1%. Conversely, its share of Japanese government bonds would rise from 4.6% to 7.4%.
This report draws on information published by CNBC.
Furthermore, NBIM plans to shift its weighting methodology for government bonds from gross domestic product (GDP) to market value, citing the elevated debt levels across nearly all major developed economies.
The proposed shift comes at a delicate juncture for the U.S. Treasury market, where long-term yields have approached decade-highs amid investor concern over fiscal trajectories and mounting federal debt. Speaking to CNBC on Friday, economist Mohamed El-Erian noted that traditional buyers of U.S. Treasurys are facing increased pressure. Commenting on the Norwegian fund’s proposal, El-Erian observed that while the absolute size of the reduction might not be massive, the signal that traditional long-term holders are becoming less reliable buyers is highly significant.
To offset the reduction in government debt, NBIM intends to increase its holdings of nongovernment U.S. fixed-income assets, such as corporate bonds, raising that allocation from 16.2% to 27.6%. NBIM Chief Executive Nicolai Tangen and Norway’s central bank governor, Ida Wolden Bache, stated that the fund can capture higher risk premiums by diversifying into mortgage-backed securities. They emphasized that mortgage-backed securities tend to move inversely to equities during crises, potentially offering volatility reduction comparable to government bonds.
Currently, NBIM manages approximately $1.65 trillion in equities—representing roughly 1.5% of all globally listed shares—and $592 billion in fixed income. While the fund has recently recorded substantial profits from the artificial intelligence and technology boom, Tangen has previously cautioned that such returns may not be sustainable during a broader market downturn.