Norges Bank has recommended a broader, more market-based bond benchmark for the Government Pension Fund Global, cutting the fixed government bond allocation from 70% to 50% and replacing gross domestic product weighting with market-value weighting. The advice maintains bonds’ roles in reducing portfolio volatility, providing liquidity and harvesting risk premiums, but gives greater weight to diversification and return sources beyond government debt as the fund reviews its strategy for a changing risk environment. The remaining 50% would include corporate, mortgage-backed, covered and government-related bonds, bringing the benchmark closer to the Bloomberg Global Aggregate. Mortgage-backed securities would account for about 13% of the recommended index and government-related bonds about 11%. Inflation-linked government bonds would remain, emerging markets would stay excluded and duration would continue to follow the market’s maturity structure. The bank estimates that a 50% government bond share would retain a comfortable liquidity buffer, including during market stress, while the broader benchmark would marginally raise expected returns and lower volatility. Norges Bank will propose mandate wording and an implementation plan after the Ministry of Finance decides on the advice, with any transition conducted gradually to limit market impact and transaction costs.
2026-09-02Norges Bank
Norges Bank recommends cutting the government bond share of the sovereign wealth fund benchmark to 50%
Norges Bank recommends reducing the Government Pension Fund Global bond benchmark’s government bond share from 70% to 50%, moving to market-value weights and broadening exposure to mortgage-backed and government-related bonds. Emerging markets would remain excluded, while inflation-linked bonds and market-driven duration would continue. The proposal advances the fund’s emphasis on broad diversification while preserving liquidity for stressed markets.