Analysts at Santander Bank have concluded that the Government Pension Investment Fund (GPIF) could sell up to $62 billion worth of US Treasuries without formally revising its asset allocation policy. Speculation that GPIF, which manages $2 trillion in assets, is increasing domestic bonds while reviewing its allocation to foreign bonds spread after the fund held an unusual board meeting last month in August. According to a team led by Antonio Villarroya, Santander's global head of fixed income, currency and commodities strategy, the current policy is flexible enough that investment managers could significantly reduce foreign bond exposure ahead of such a review, and US Treasuries carry the greatest selling risk. GPIF currently sets a basic allocation of 25% to foreign bonds, allowing a deviation of plus or minus 5 percentage points, and Santander analyzed scenarios including cutting the foreign bond ratio to 20% of the portfolio within the current policy range. According to US Treasury Department data, Japan holds $1.1 trillion in US Treasuries, the largest amount of any overseas holder.
Banco Santander S.A.Santander analysts produced the GPIF Treasury-selling analysis, but the news is not about Santander's own business.
GPIF may sell up to $62B in US Treasuries as it shifts allocation toward domestic bonds, pressuring Treasury prices/yields.
