Saudi Arabia’s US Treasury holdings hit four-year high

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.

Shifting reserves: A tactical play

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.

Earlier this month, Yasir Al Rumayyan, the head of the PIF and a trusted ally of Prince Mohammed, was spotted sitting next to Trump at a UFC event in New York. That was a public display of camaraderie that could mean the kingdom is ready to recalibrate its US relationships under a familiar political ally.

Treasury yields surge: Investors await labor data

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.

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