SINGAPORE, March 27 (Reuters) - South Korea’s National Pension Service, the world’s fifth biggest pension fund, will no longer buy U.S. Treasuries because yields are too low, the Financial Times reported on Thursday.
It said the move could signal a big shift by financial institutions away from U.S. government debt into higher-yielding assets.
“It is difficult to buy more U.S. Treasuries because the portion of our Treasury investment is already too big and Treasury yields have fallen a lot,” the newspaper quoted Kwag Dae-hwan, the head of global investments at the pension fund, as saying.
“We need to diversify our portfolio away from U.S. Treasuries and we find asset-backed securities and corporate debt more attractive because of wider credit spreads.”
The pension fund has $220 billion in assets. It holds about $14 billion in U.S. government debt, a small amount compared with the overall $4,500 billion Treasury market, the report said.
The fund has $24 billion in overseas assets, of which $7.2 billion is in foreign equities.
A new two-year note yielded around 1.7 percent in Asian trade on Thursday. The Financial Times said yields had fallen from 5 percent last June.
It said the pension fund wanted to diversify its portfolio and boost returns because it faces a shortfall in funds due to the country’s ageing population. (Reporting by Neil Fullick; Editing by Alan Raybould) (+65=-6870-3818; email: email@example.com)