Norway's oil fund offloads US paper
By Ambrose Evans-Pritchard (Filed: 18/05/2005)
telegraph.co.uk
Norway has slashed its holdings of US Treasury bonds in
the latest sign that foreign governments may be losing
their appetite for "costly" American debt.
Europe's second biggest investor in US Treasuries, Norway
halved its holding in March from $33.8billion (£18.4billion)
to $16.9billion, according to fresh data released in
Washington.
Market analysts said Norway's government petroleum fund
was almost certainly responsible for the sell-off.
Flush with petrodollars, the $160billion fund invests
worldwide to cover future pensions and health costs long
after Norway runs out of oil and gas.
A US Treasury report on Monday revealed that Norwegian
sales accounted for a surprise $15billion drop in net
purchases of US securities by foreign institutions in March.
Steiner Juel, Nordea bank's chief economist in Norway, said
the fund appeared to be making a timely exit before a
possible bloodbath in the US debt markets.
"They're afraid that long-term interest rates will go up
strongly, leading to heavy losses in bonds. The view is that
yields are much too low," he said. The sales may not have
had any impact on the US dollar, which has rebounded over
recent weeks.
One analyst said: "They are worried about Treasury prices,
not the currency risk, so they may well have parked the
money on deposit in dollars."
The petroleum fund warned recently that bond yields were
"very low seen in a historical perspective" and that it was
"not natural" for this to continue.
Alan Greenspan, chairman of the US Federal Reserve,
triggered a brief sell-off earlier this year by warning that
the low yields were a "conundrum", but bonds have since
recovered.
Though a branch of the central bank, Norway's petroleum
fund is free to hunt down the best return anywhere in the
world. The fund, invested 40pc in equities and 60pc in fixed
income, earned a return of 8.9pc in 2004.
Launched in 1996, it siphons off a large part of Norway's oil
revenue into foreign investments to prevent overheating of
the domestic economy, avoiding the "oil curse" that afflicts
most crude exporters. Alaska and Alberta have similar
funds.
Norway is the world's third biggest oil exporter after Saudi
Arabia and Russia. Oil and gas make up 45pc of the
country's exports, and 17pc of GDP.
Expected to top $200billion by the end of this year, the
fund will soon surpass Norway's total GDP. |
