Norway’s sovereign wealth fund has proposed a bond portfolio shift that could significantly reduce its exposure to US government debt.

The fund, managed by Norges Bank Investment Management, wants to cut the share of government bonds in its fixed income portfolio from 70% to 50%.

The idea is to free up more room for riskier debt instruments that could offer better returns over time. This proposal was sent in a letter to Norway’s Ministry of Finance earlier this week.

To understand the scale here, the fund held more than $615 billion in fixed income assets as of 30 June, and nearly 59.5% of that was parked in government bonds.

If the new 50% target goes through, it would mean roughly $58 billion less in government debt overall. The impact won’t be spread evenly across countries though. US Treasury holdings are expected to take the biggest hit, potentially dropping by around $75 billion.

On the other hand, the fund’s holdings of Japanese government bonds could actually rise by about $20 billion, while exposure to euro area government debt is likely to shrink as well.

According to the fund, keeping half its bond portfolio in government debt still gives it enough of a cushion to handle liquidity needs, even during times of market stress.

The remaining half would be used to chase a wider range of returns across the fixed income space. This announcement comes at a time when bond markets globally have been under pressure.

Yields have been climbing steadily as investors weigh persistent inflation, heavy government borrowing and expectations that central banks may need to keep rates higher for longer.

The US 10 year Treasury yield, for instance, crossed 4.75% earlier this week, its highest level since January 2025.

Alongside the allocation change, the fund also suggested a shift in how its government bond benchmark is built, moving away from weighting by GDP and instead using market value, since high public debt has become common across most developed economies now rather than being limited to a handful of countries.

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