Saudi Arabia Boosts US Treasury Holdings to Pandemic High
Saudi Arabia has significantly increased its US Treasury holdings, adding $4 billion by the end of June, bringing its stockpile to its highest level since the 2020 pandemic, Bloomberg reports.
The amount stood at just over $140 billion at the end of the first half of the year, according to the latest figures from the Treasury Department. Other top US government debt holders, including China, the UK and France, also increased holdings in the world’s safest asset.
“A key factor was taking advantage of the higher interest rate,” according to Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC.
The strength of the US dollar and the fact that Treasuries are a liquid asset were also factors, she said.
The world’s largest oil producer has been adding to its holdings since April.
US Treasuries are traditionally known for being safe assets, especially at times of uncertainty in the global economy. The benchmark 10-year Treasury yield rose by 10 basis points by the end of June, and is currently hovering around 3.9%.
Saudi Arabia had drawn down its holdings of US debt in 2020, when the Covid-19 pandemic ravaged the global economy. That was also around the same time the central bank transferred $40 billion to the kingdom’s sovereign wealth fund to finance a flurry of stock investments during a slump in equity markets caused by the pandemic.
Other countries have been buying more US Treasury bonds, with a total of $8.2 trillion in these bonds owned by foreign investors, as of June. According to experts, this trend is linked to the investors’ desire to lock in higher yields before potential interest rate cuts by the Federal Reserve later this year, taking into account a recent decrease in the US consumer price index to 2.9% last month — the lowest level in over three years.
