European Firms Cut U.S. Treasury Holdings as Debt Hits $40 Trillion

European financial institutions are reducing their exposure to U.S. government debt as federal debt surpasses 40 trillion dollars and 10-year Treasury yields hover around 5 percent, the highest level since 2007. Investors cite a deteriorating U.S. fiscal outlook and a shift in the perception of Treasuries as risk-free assets.

Norges Bank Investment Management, the manager of Norway's sovereign wealth fund, proposed lowering the share of government bonds in its fixed-income benchmark from 70 percent to 50 percent. This change specifically reduces the weighting of U.S. government bonds from 34.1 percent to 21.9 percent. Other firms, including Swisscanto Asset Management International S.A. and Brown Shipley, have reduced positions or maintained underweight stances, citing geopolitical uncertainty, high borrowing, and market interventions.

Industry leaders from BlackRock and Man Group have questioned the traditional status of Treasuries, noting that policy uncertainty and the relocation of gold reserves by U.S. allies reflect international unease. While the U.S. Treasury has expanded buybacks of longer-dated securities, analysts from BNP Paribas Wealth Management Asia suggest these measures are unlikely to have a lasting impact on yields or address underlying fiscal risks.