Saudi Arabia’s Four-Year High in US Treasury Bonds

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by Giorgi Kostiuk

2 years ago

Saudi Arabia's investments in US Treasury bonds have reached their highest level since 2020, despite a decline in total reserves.

Rise of Saudi Investments in US Bonds

Saudi Central Bank (SAMA) reports that investments in US Treasury bonds have hit $144 billion, making up 35% of the kingdom's total foreign assets. This is the largest share since February 2020, coinciding with the onset of the COVID-19 pandemic. However, Saudi Arabia's total foreign reserves have dropped to $411 billion, marking a low since February 2020.

Strategic Reallocation of Reserves

The decline in reserves reflects a mix of economic strategy and fiscal necessity, following a sharp drop after a $40 billion transfer to the Public Investment Fund (PIF) during global market turmoil. This was an opportune moment to acquire discounted assets. The potential return of Donald Trump to the White House could strengthen Saudi Arabia’s political and economic ties with the US.

Rising Bond Yields and Market Expectations

Treasury yields increased as investors prepared for important labor and manufacturing data releases. The 10-year Treasury yield rose by 1 basis point to 4.207%, while the 2-year yield increased by 2 basis points to 4.192%. Investors are focused on upcoming data, including employment reports and unemployment rate updates, with an expected job increase for November.

Saudi Arabia's investments in US Treasury bonds reflect a strategic approach to managing financial reserves amidst a shifting political and economic landscape.

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