The US Paper Dump Continues: Norway's Sovereign Wealth Fund Sells All Of Its US MBS Exposure

Tyler Durden's picture

Two days ago we noted that foreigners are selling US paper at a record pace, whether to raise capital in a locked out liquidity environment like French banks, or to make a politicial statement, like China. Today we get the first confirmation to this from Norway's Sovereign Wealth fund, best known for its prediction that it would buy and hold Greek bonds in perpetuity back in September 2010. Just recall: "Norway has taken the view that [Greek bonds] will not [default]. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default." Well, about a year later it is now official that the best the Norway SWF can hope for is a 50% recovery. So what does it do? It proceeds to dump US paper. Mortgage Backed Securities first. Because if it announced that a sovereign wealth fund instead of buying into the biggest ponzi ever, we finally defecting from it, then all bets would be of. Bloomberg reports: "Norway’s $570 billion sovereign wealth fund sold all its holdings in U.S. mortgage-backed securities as part of a shift of its fixed-income portfolio. The fund holds no mortgage bonds issued by Fannie Mae and Freddie Mac, the U.S.-controlled mortgage financiers, and an “insignificant” amount of private home loan-backed bonds, said Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, today in an interview in Oslo. “We’ve reduced our holdings of mortgage-backed securities,” he said. “MBS has been taken out of our internal policy benchmark. This means that we don’t have mortgage-backed securities issued by Freddie Mac and Fannie Mae any longer."

The stated reason for the dump: prepayment risk: "The debt was sold primarily because of the refinancing risk, he said. In the U.S., when a borrower refinances a mortgage it can cut short the maturity of the bond backed by the loan and reduce the expected interest over time, so-called prepayment risk." The real reason? Why shoring up capital of course. "The fund held 36 billion kroner ($6.6 billion) in bonds from Fannie Mae at the end of the second quarter and 11.5 billion kroner from Freddie Mac at the start of the year." And with the Fed telling us that almost $100 billion in US bonds and MBS having been sold in the past two months, one can be absolutely certain that i) it is not just MBS and ii) it is not just Norway.

From Bloomberg:

The fund’s bond holdings, which totaled $216 billion at the end of the third quarter, returned 3.7 percent in the third quarter, helped by gains in German and U.S. government bonds, the fund said today. The fund’s securitized debt, which was 18 percent of the portfolio, gained 0.3 percent as measured in international currencies.

This is bad news for PIMCO just as the fund was preparing for an MBA-based QE3 launch and buying up every MBS out there. Although judging by the Norwegian's success at predicting markets, the dump may in fact merely bolster PIMCO's thesis.

Fannie Mae and Freddie Mac mortgage bonds fell earlier this week as the U.S. Federal Housing Finance Agency announced changes to guidelines for the government-supported companies’ refinancing program affecting so-called underwater borrowers.


The decline prompted Pacific Investment Management Co., manager of the world’s biggest bond fund, to call for investors to buy the bonds. Pimco boosted mortgage securities to 38 percent of assets in its $242 billion Total Return Fund in September, the most since January, from 32 percent the prior month, according to data on the firm’s website.

And some more color on the fund administering the trade surplus of what some consider Europe's best run country:

The fund announced today it has changed its internal benchmark portfolio, reducing it to 4,000 bonds from 11,500 bonds and keeping primarily corporate and government debt. The fund also weighted its euro government bond holding according to gross domestic product rather than the size of the market, which it had earlier proposed as a way of reducing its holdings in nations with increasing debt.


The investor, which is part of the central bank and gets guidelines from the government, held 55.6 percent in stocks, 44.1 percent in bonds and 0.3 percent in real estate at the end of the quarter. It’s mandated to hold 60 percent in stocks, 35 percent in bonds and 5 percent in real estate, which it first bought this year.


Norway, a nation of 4.9 million people, generates money for the fund from taxes on oil and gas, ownership of petroleum fields and dividends from its 67 percent stake in Statoil ASA (STL), the country’s largest energy company. Norway is the world’s second-largest gas exporter and the seventh-biggest oil exporter. The fund invests outside Norway to avoid stoking domestic inflation.

While Norway may me lucky, its sovereign wealth fund sure isn't. And we venture to say, it isn't the only one.

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EscapeKey's picture

And some more color on the fund administering the trade surplus of what some consider Europe's best run country:

It sort of helps sitting on - considering the population size - vast energy fortunes.

The story behind how they got them all includes an alcoholic Danish foreign minister, and a Norwegian summit, where he was liberally plied before signing over all the major fields.

Yellowhoard's picture

Copy that.

Countries with large natural resources relative to the size of their populations will be the relative winners in the global meltdown.

DormRoom's picture

uhm. you're sort of wrong.


When stagflation & hyperinflation hits, there will be no shelter.


Commodity based nations, like Canada & Australia will experience severe Dutch disease, as inflows into their currencies, as an inflation hedge, destroys the manufacturing sector.

massive layoffs will ensue.

And as prices climb, but not output, commodity based, developed nation will be entrenched in accelerating stagflation.  There is no escape.  Social society will begin to collapse.  In the US  muni wont' be able to  sell bonds.  Munis go bankrupt, or are forced to cut emergency services.

Even if you hold physical gold in the US, you are not safe.  There will be massive breaking & entering of homes as people try to salvage exchangeable physical goods.  And there will be no police force to enforce the law.


California will be the hardest hit, as their Million+ prison population, begins to be a bigger burden.  And if it collapses, you'll have criminals flooding out, exasterbating the bedlam.


And if you keep gold in a bank, the government may confiscate it.

Phenemologically, a fiat currency system is an exchange system of trust.  So if the fiat currency system collapses, it necessitates a collapse in trust throughout civil society. Without trust modern exchange mechanisms break down. And the ramifications are many.


let's have no illusion.


peekcrackers's picture

 umm  your sorta  wrong .. no YOUR JUST PLANE WRONG !

Phenemologically, a fiat currency system is an exchange system of trust.  So if the fiat currency system collapses, it necessitates a collapse in trust of civil society. Without trust exchange mechanisms break down. And the ramifications are many.

and that is why people threw out time have held silver and gold .

That is why china told all they're people .. buy silver and gold vs Rsp

this is why central banks horde silver and gold.

the dollar was a derivative from silver and gold  ( bretton woods system)

why do you think the first plundering of any counrty the U S invades is silver and gold.

Just so you know if you realy want to own your land in Canada , you can ask the CRown to buy in silver or gold.



do you see a pattern ?

trav7777's picture

the pattern I see is your misspelling of at least one word in every sentence you write.  People who cannot write properly just plane[sic] have no credibility

Mr Lennon Hendrix's picture

Spelling does not make or break rationale.  Grammer, logic, absolutely.  But just because I can't remember which words have double consonance, and just because I can't remember which vowel to use, does not make me any less intelligent from someone else.

It just means I did not read much in HS.  I apologize for doing drugs, drinking booze, playing sports, filming movies, having fun while copying my homework from the girls in my classes, and chasing that same skirt while I was younger.  If I could go back in time I would have not flunked out of econ and lituratuare, but until you find a time machine to make my scripting complete, you will have to deal.

disabledvet's picture

Grammer? Is that Kelsey Grammer? Or is it Kelsey's Grammar? Perhaps it was a book? "No, just some tripe." I thought tripe was a bird? "It's a fish." Who gave you the bird? "No one gave me anything." Shut up and eat your pee.

MillionDollarBonus_'s picture

Zero hedgers need to grow up and stop arguing about meaningless issues. The real question is HOW ARE WE GOING TO BOOST AGGREGATE DEMAND? Every American needs to do their part to help this consumer economy to make sure these doomer hypotheses don't come true. Why not be productive and spend some time in the mall rather than fantasizing about these doomer scenarios.

Pure Evil's picture

Don't forget to include copper clad lead in your investment profile.

Long-John-Silver's picture

Don't forget food. You need a years supply for each person that will shelter with you. Also remember that you need family or true friends for one simply reality. Someone needs to be awake and watching evey moment of the day and night.

AldousHuxley's picture

During times of social collapse: Guns > Food > Gold


There isn't much you can't rob with big enough of a gun.



Mr Lennon Hendrix's picture

I really don't agree.  I don't think there will be a collapse like some others see it.  I think we will come together to form a better society than the current one.  Sure, guns will play a large role, but people will band together to form community.

Sure there will be bad guys/gals, but the good guys will have guns.  And I don't think people will be running from house to house robbing people of their wealth, that would take too much energy for almost no benefit.

I mean come to my house; if you are unfriendly, you will be met with gunfire, and I don't have any gold or silver anyway.  This will stop people from stealing.

And I will be buying ammo and guns with gold.


AldousHuxley's picture

I' like to modify....



guns is no good when you don't have a trigger finger.

AldousHuxley's picture

Sure there will be bad guys/gals, but the good guys will have guns

In times of crisis, there is no good or bad...just survival mentality. And right now military has guns. Thus, most shithole countries in Africa are led by military leaders. Nice good girls are not in the military my friend.  They are professional killers who have killed before and also probably find killing fun thus interested in military to begin with not normal civilian life.


And I don't think people will be running from house to house robbing people of their wealth, that would take too much energy for almost no benefit.


That will be a necessity as stores of wealth will be ransacked so thus cannot exist. Only way to sustain would be to rob place from place. That's why even missiles won't be useful when you have 1000s eating the corn in the farm field. You can't fire the missile to destroy the farm. So light mobile weapons will be useful for disorganized pirate style living.

I mean come to my house; if you are unfriendly, you will be met with gunfire

You can't shoot fast enough to protect any assets like a house. USA has 300,000,000 people. Dozen will come to your front door, while dozens will steal your food storage at the same time.

And I will be buying ammo and guns with gold.

Gold becomes a liability. You need to hire teams of people with guns to protect it. and sooner or later you have to engage in trade when you run out of food. But trade routes will be controlled by mobs with big guns taxing you for protection fee.


BUT by this point, life is hopeless anyways. It is no longer life but hell on earth. Maybe George Bush wasn't so crazy about space program to MARS.







Mr Lennon Hendrix's picture

I have faith in community.  I think we will band together more than we will fall apart.  I do not believe the government will be able to keep its foothold on the world political scene, and like many governments before it, I think it will fall to the wayside.

I think the world will be able to make it along without government, and we will band together in communities to do so.  It will be neighborhoods making sure to keep any rioters out.  It should be easy, since everyone is armed.  It will not be so easy for London, etc, as we have already seen.

Troll Magnet's picture

i'm going to do my part and go buy me a dime bag today and another dime bag tomorrow which will lead to buying a bag of snickers and many, many bags of doritos. 

Schmuck Raker's picture

Think I'll just go over and impregnate my Mormon neighbor's daughter.

It'll save a lot of shopping time whilst depriving TPTB of the profit opportunity.

Not to mention...

robertocarlos's picture

That leads to more consumption. I wish I knew for certain if we have unlimited energy or not. The Bible says to spring forth and multiply, and my old shop teacher Mr. Adler says  "stop screwing around".

Schmuck Raker's picture

"I wish I knew for certain if we have unlimited energy or not."

You'll eventually find it to be age related.

Oh regional Indian's picture

OT, but Highly Pertinent, can anyone whatch this and not want to rip someone's head off? 

This makes so many things irrelevant. And no, it's not about Finance.

It's about Boys Town.



Harlequin001's picture

At times like this I think MDB actually IS the central Bank...

This is just straight out of the CB text book...

The only way you can boost aggregate demand is to create genuine wealth, not debt, which has a very short lifecycle before it stops...

Perhaps the CB's should consider that before printing any more money and undermining my wealth...

Pure Evil's picture

Hey MillionDollarBonus, how bout I boost my foot up your ass.

Maybe I can't spend much time in the Mall due to the fact that I have to spend all my descretionary funds purchasing $3.50 gas. Or, the fact that I'm unemployed because the fascist criminal corpocracy has offshored my job to southeast asia, or insourced workers from India and Mexico.

Why should I spend my hard earned funds in a Mall that only offers overpriced crap made by chinese slave wage earners. With over 43 million Americans living on food stamps, or millions living in tent cities, and approximately 30 million unemployed, exactly where is the money supposed to come from to buy more 70 in flat screens?

Going to the Mall and buying worthless crap only helps the Wall Street Fat Cats and their worthless paper pushing securities ponzi scheme.

Tell the Retailers to fuck off, buy gold, silver, and lead.

robertocarlos's picture

You just don't understand the MDB posts. It's sarcasm. Which doesn't work on the internets unless you are familiar with his posts. 

Pure Evil's picture

Obviously a lot of people don't agree with your sentiment.

But, on ZH everyone is allowed their own special delusions.

My advice, cut back on the Shrooms, and you won't need the tin foil hat to block the radio waves from Obama central.

mjk0259's picture

Funny the first couple times. Now you are just annoying.

Schmuck Raker's picture

Right away MDB. I'm going out to buy that couch I've been eyeing at my local Ikea.

Because I'm a Patriot, and I'm not as afraid of Arab-American cabbies as I am Deflation.


Mr Lennon Hendrix's picture

They may take our lives, but they'll never take our armchairs in obscere green stripe patterns!

DosZap's picture


Why not be productive and spend some time in the mall rather than fantasizing about these doomer scenarios.

 Email me and I will give you my address, where you can send me some CASH, and I will happy and grateful to take your $$$ to da Mall.

It's so easy asking/telling other folks to spend THEIR money/savings.(Your an Obama supporter and voter no doubt).

matrix2012's picture

agree...visit malls more often, consume more to boost the economy, get more credits to prop such consumption... :D

just don't let your plastic cards idle!! Who knows you may get the same treatment as Greek...get a 50% discount some time later :D a fire sale!

trampstamp's picture

So Are you saying Tyler doesn't have credibility? Just this article is riddled with mis-spelled words. Is he not credible? I thought so. Who gives a fuck if he misspelled a few words

earleflorida's picture

- it's the free-flow-writing,... agglutinated to, comme il`faut, that masters tyler's undulated streams of objective, relevant, and timely   post! - 


thankyou,  tyler 

malikai's picture

I believe punctuation is important as well.

Mr Lennon Hendrix's picture

Puncuation is important, as it controls the cadence, and thus, how someone reads.  It is a way to manipulate the readers tempo in such a way that you can control one's thoughts.  Proper puncuation, however, is a non complete, because puncuation is very opinionated.

How should I control my writing?  This is an art, and art is subjective.  Of course, one could puncuate poorly, but for the most part, it is a matter of ploy.

PS, certain rules do exist, like apostrophes and the like, but my point is that most punctuation is for game.

peekcrackers's picture


The only credibility I need is Gold and silver in my hand.

Spend time stacking  vs spelling.

Troll Magnet's picture

if you can hold your gold and silver in your hand, YOU DON'T HAVE ENOUGH!

Fíréan's picture

There's seems to be a greater quantity of off topic and pithy replies relative to the series nature of the article to which the off topic replies are posted : the size of the distraction reflects the concerned level of truth. i wonder if the intent is to bury serious on-topic in a blanket of boring crap replies, assuming readers won't bother to scroll down (nobody reads all the replies ) and read informative and agreeable  responses from readers ?

Are the MBS ( mortgage backed securities ) now percieved as a liability ? Has someone woken up to the scam and now concerned that true value of these bonds could be exposed in any litigation, now that law suites are taking off all the place ?

( NB : if i search for the State of Delaware vs MERS artcile it's there, and yet if i scroll back to 10/27/2011 i cannot find it ? ? ? ? )

peekcrackers's picture


credibility Is to come by then if I use my spell check .. like you .

disabledvet's picture

"there's not enough of it" and "you don't have that gold." you claim "the market will soar" but "the market determines that" not you. the complaint against The Americans is "they're just a nation of farmers." That complaint might be "eaten" pretty soon cuz "these farmers move that food" too. And an another thing: "stop paying government workers" and see what happens. As noted above "that includes the prison population." And on and on and on i could go. Again let me sum my argument up for the upteenth time: