Defense fully loaded! Buffett's holdings of short-term US Treasuries now exceed the Fed's
Warren Buffett's total holdings of short-term US Treasury bonds exceed those of the Federal Reserve, with Berkshire Hathaway holding $234.6 billion in short-term US Treasury bond investments. This move is seen as a signal of Buffett's lack of confidence in the US economy and market. Buffett has previously stated that he would buy US Treasury bonds during times of crisis, and with the current rise in US Treasury bond yields, Buffett's funds are earning substantial returns. Meanwhile, the Federal Reserve is reducing its asset holdings and implementing quantitative tightening policies
As Buffett builds his "cash fortress" to record levels, Berkshire Hathaway now holds more short-term U.S. Treasury bonds than the Federal Reserve.
According to the company's second-quarter financial report, as of the end of the second quarter, this enterprise group headquartered in Omaha, Nebraska holds $234.6 billion in short-term U.S. Treasury bond investments, while also having over $42 billion in cash and cash equivalents, including U.S. Treasury bonds with a term of three months or less.
In comparison, as of July 31, the Federal Reserve only holds $195.3 billion in short-term U.S. Treasury bonds. The Federal Reserve holds a total of $44 trillion in U.S. Treasury bonds, including short-term, notes, long-term bonds, and inflation-linked securities.
During the pandemic, the Federal Reserve has been a major buyer of government debt, as part of its efforts to maintain market liquidity, the Federal Reserve has been one of the largest holders of U.S. Treasury bonds.
At 93, Buffett sold a large amount of stocks including Apple in the last quarter, a surprising move but one that showed foresight. This week, global stock markets experienced severe selling, Berkshire has been selling stocks for seven consecutive quarters, but accelerated selling in the last quarter, Buffett sold over $75 billion in stocks in the second quarter.
Many loyal Buffett observers believe that his selling decision sounded the alarm for the market, as the "Oracle of Omaha" seems to be less optimistic about the U.S. economy and market.
Buffett has previously stated that during times of crisis, he would directly purchase U.S. Treasury bonds at auctions. The government sells Treasury bills with maturities ranging from 4 weeks to 52 weeks. Due to the surge in U.S. Treasury yields over the past two years, Buffett's massive funds have been earning substantial returns. Investing $200 billion in cash in 3-month U.S. Treasury bonds at around 5% interest would generate approximately $10 billion in annual income, or $2.5 billion in income per quarter.
After the market turmoil caused by the COVID-19 pandemic, the Federal Reserve purchased around $5 trillion in U.S. Treasury bonds and mortgage-backed securities to help boost the economy. However, since June 2022, the Federal Reserve has been reducing its asset holdings, a plan widely known as quantitative tightening. The Federal Reserve seeks to promote maximum employment and stable prices through independently formulating monetary policy. This includes buying and selling publicly held Treasury bonds to control the money supply and interest rates