Buffett has noted in the past that during times of crisis he tends to buy Treasury bills at auctions, so given the context, it shouldn’t be a signal that an investor would overlook.
Buffett’s mammoth nest egg has been earning handsome returns thanks to rising Treasury yields.
Berkshire Hathaway of Warren Buffett now owns more in Treasury bills than the US Federal Reservewhile the Oracle of Omaha brings his cash reserve to a record level.
The Nebraska-based conglomerate had $234.6 billion in short-term investments in Treasury bills at the end of the second quarter, while holding more than $42 billion in cash and cash equivalents that included Treasury bills with maturities of three months or less, according to its quarterly financial report.
This compares with the $195.3 billion in Treasury bills the Federal Reserve held as of July 31. The central bank held $4.4 trillion in Treasury securities, which include notes, bonds and securities adjusted for inflation. The Federal Reserve was a major buyer of government debt during the pandemic and is always one of the largest holders of Treasury bonds as part of its effort to maintain liquidity in the markets, according to a report by CNBC.
Buffett’s moves that surprised the market
Buffett, 93, made a surprising move by selling large stock positions last quarter, ahead of a dramatic global sell-off this week, including Apple. Berkshire has now been a short-seller for seven straight quarters, But that selling accelerated in the latest period, with Buffett dumping more than $75 billion worth of stock in the second quarter.. Many loyal Buffett followers saw the decision to divest his major holdings as a wake-up call, with the Oracle of Omaha apparently turning pessimistic about the economy and markets.
Buffett has said in the past that during times of crisis he buys Treasury bills directly at auctions. It should be noted that the US government sells Treasury bills for periods ranging from four to 52 weeks.
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Buffett’s mammoth stash has been earning handsome returns thanks to rising Treasury yields over the past two years. If invested in three-month Treasury bills at about 5%, $200 billion in cash would generate about $10 billion a year.or $2.5 billion per quarter.
After the Covid-19 pandemic rocked markets, the central bank bought about $5 trillion in Treasury bonds and mortgage bonds to help the economy. But the Federal Reserve has been reducing its asset holdings since June 2022, in a program widely known as quantitative easing.
The Federal Reserve seeks to promote maximum employment and stable prices by independently setting monetary policy. This includes buying and selling Treasury securities held by the public to control the money supply and interest rates.
Source: Ambito
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