Oil Funds Can’t Buy Fannie Bonds

Russia banned on Thursday investment of its $220 billion oil wealth funds in bonds of quasi-sovereign agencies such as Fannie Mae and Freddie Mac, citing needs of its own budget and pension system.

Russia had about $100 billion of its foreign currency reserves invested in U.S. government agencies at the start of 2008 as it sought to broaden its portfolio and chased higher yields.


It has now cut its holdings to zero as its reserves fell by a third to $384 billion on the back of capital outflows and ruble support and as authorities sought to invest the remaining wealth into less riskier assets.

The Finance Ministry said it needed to shift the portfolios in favor of more liquid assets, such as sovereign bonds, as Russia plans to tap the funds to cover budget and pension fund deficits this year.

Moscow Times