(Bloomberg) -- Norway’s $1 trillion sovereign wealth fund is betting bond yields have further to rise.
The world’s biggest wealth fund is for now sticking to an overweight position in the shorter bond maturities as the U.S. 10-year Treasury yield has broken through the 3 percent threshold for the first time since 2014.
The bias is meant to make it less sensitive to a general increase in yields than the benchmark index it follows. While the strategy is continually assesses by market and by currency, the rise in U.S. yields is an isolated phenomenon, said Yngve Slyngstad, the chief executive officer of Norges Bank Investment Management.
“There’s been a lot of focus on U.S. interest rates, but in the other main markets, it’s been pretty stable, you haven’t had the big rate changes,” he said in an interview in Oslo following the presentation of the fund’s first-quarter report on Friday. “Monetary policy is in a different cycle than Europe and Japan, especially.”
Norway’s fund, the biggest of its kind, reported its first quarterly loss in two years as it suffered from a global selloff in equities in the three first months of the year. It held 66.2 percent in stocks at the end of the first quarter, 31.2 percent in bonds and 2.7 percent in real estate.
The fund’s fixed-income investments fell 0.37 percent in the quarter, outperforming a 0.44 loss in its benchmark index’s fixed-income portion.
The fund held $75 billion in U.S. Treasuries at the end of the first quarter, $22 billion in Japanese government bonds and $14 billion in Germany’s debt.
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