The Kingdom of Saudi Arabia has made a significant financial move by increasing its holdings of US Treasury bonds. By the end of June 2024, Saudi Arabia added $4 billion to its investments, bringing the total to over $140 billion. This marks the highest level of US debt holdings for the Kingdom since the onset of the COVID-19 pandemic in 2020. This strategic shift aligns with global trends, as other major economies such as China, the UK, and France have also ramped up their investments in US Treasuries during this period.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, highlighted the primary motive behind this increase: capitalizing on rising interest rates. The strength of the US dollar and the liquidity provided by Treasury bonds have also played crucial roles in this investment strategy. This change indicates a departure from Saudi Arabia's earlier pandemic strategy when it reduced its US debt holdings and redirected $40 billion from its central bank to its sovereign wealth fund, focusing on equity investments amid declining financial markets.
The timing of this increase in holdings comes as investors are anticipating potential shifts in US monetary policy, particularly with speculation surrounding a possible interest rate cut by the Federal Reserve later this year. The recent decline in the US consumer price index, which fell to 2.9%—its lowest level in over three years—has fueled expectations for lower interest rates and enhanced the appeal of Treasury bonds.
