Saudi Arabia’s investments in US Treasury bonds have soared to their highest point in four years. The Saudi Central Bank (SAMA) now holds $144 billion in US Treasuries, which account for 35% of its total foreign assets as of the latest data in October.
This is the largest share since February 2020, when the COVID-19 pandemic first rattled global markets. Despite this surge in US bond holdings, Saudi Arabia’s total foreign reserves have plunged to $411 billion, marking their lowest point since February 2020.
The drop reflects a mix of economic strategy and fiscal necessity, with massive withdrawals directed toward the country’s sovereign wealth fund and domestic government spending.
In 2020, SAMA’s US Treasury holdings made up over 37% of its foreign reserves before dropping sharply. The decline came after a $40 billion transfer to the Public Investment Fund (PIF) as the government moved to capitalize on global market chaos.
It tapped those reserves to buy discounted assets during a period of investor panic. The timing of this shift is impossible to ignore. Donald Trump’s return to the White House could rejuvenate Saudi Arabia’s political and economic alignment with the US.
Crown Prince Mohammed Bin Salman, who enjoyed a close relationship with Trump during his first term, appears to be positioning Saudi Arabia to strengthen ties with the incoming administration.
Treasury yields edged higher on Monday as investors braced for key labor and manufacturing data set to drop later this week.
The 10-year Treasury yield ticked up by 1 basis point to hit 4.207%, while the 2-year yield climbed 2 basis points, landing at 4.192%. On Friday, the 10-year yield had dipped to its lowest point since late October, catching some attention before this week’s movements.
For context, a basis point is 0.01%, and yields move in the opposite direction of bond prices. Right now, investors are laser-focused on upcoming labor data, hoping to gauge the US economy’s pulse.
On Wednesday, the Job Openings and Labor Turnover Survey (JOLTS) for October will drop, giving numbers on job openings, hires, layoffs, and quits. It’s a solid first look at how the labor market is holding up.
Then, the big one: Friday’s November jobs report. Analysts are betting on a gain of 177,500 jobs for the month, based on FactSet’s consensus, which would be a big jump from October’s slim 12,000 jobs. Unemployment is also expected to inch up slightly to 4.2% from 4.1%, according to the same estimates.
Elsewhere, India’s rupee has fallen to its lowest point ever, trading at 84.6850 per dollar after a government report revealed the slowest economic growth in two years.
But the rupee isn’t just slipping because of domestic issues. U.S. President-elect Donald Trump has fired off threats at India and its fellow BRICS members, demanding they abandon their plans to challenge the dollar.
The timing couldn’t be worse. India is already grappling with inflation that refuses to drop below the Reserve Bank of India’s 4% target. Now, with Trump’s harsh words looming over global markets, the rupee and emerging-market assets are taking heavy hits.
India’s five-year bond yield dropped by nearly six basis points to 6.62%, while traders bet on rate cuts during the Reserve Bank of India’s meeting on December 6. Meanwhile, stocks sank. Investors clearly don’t like what they’re seeing.
“The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER,” said Trump. The president warned these countries to drop their plans for a new currency or face devastating consequences, including 100% tariffs and a complete lockout from the U.S. market.
“They should expect to say goodbye to selling into the wonderful U.S. economy,” Trump added. Throughout his campaign, Trump repeatedly said the dollar must remain the world’s dominant currency.