Saudi Arabia added $4 billion to its holdings of US Treasury bonds by the end of June 2024, bringing its total holdings to more than $140 billion, the highest level since the start of the coronavirus pandemic in 2020, according to a Bloomberg report.
This move is in line with broader global trends, as other major countries such as China, the United Kingdom and France increased their investments in US Treasuries during this period.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, told the agency that the main driver behind the increase was the benefit of higher interest rates, adding that the strength of the US dollar and the liquidity provided by Treasury bonds were key factors contributing to this trend.
The change marks a shift from Saudi Arabia’s previous strategy during the pandemic, when the kingdom reduced its holdings of U.S. debt in 2020. At the time, the Saudi government transferred $40 billion from the central bank to its sovereign wealth fund to finance equity investments amid a financial market downturn caused by the pandemic.
Saudi Arabia’s increased holdings of US Treasury bonds, according to Bloomberg, come at a time when investors are preparing for a possible change in US monetary policy. With speculation about a possible interest rate cut by the Federal Reserve later this year, investors are seeking to secure higher returns.
In July, the US consumer price index fell to 2.9%, its lowest level in more than 3 years, boosting expectations of interest rate cuts and increasing the appeal of Treasury bonds.
