Billionaire Warren Buffett’s company holdings of U.S. Treasury bonds have surpassed that of the Federal Reserve.
On Wednesday, August 7th, according to a report by the American financial media CNBC, Berkshire Hathaway’s cash reserves have soared to record levels, with their holdings in U.S. Treasury bonds even exceeding those of the Federal Reserve.
The company’s quarterly financial report indicates that by the end of the second quarter, their short-term U.S. Treasury investments amounted to $234.6 billion, along with holdings of over $42 billion in cash and cash equivalents, including U.S. Treasury bonds with maturities of three months or less.
Compared to the Federal Reserve’s holdings of U.S. Treasury bonds amounting to $195.3 billion as of July 31st, Berkshire Hathaway’s holdings of short-term U.S. Treasury bonds exceed that of the Federal Reserve.
The Federal Reserve currently holds bonds totaling $44 trillion, which includes treasury bonds, securities, and inflation-protected securities.
During the pandemic, the Federal Reserve has been a major buyer of U.S. Treasury bonds and has long been one of the largest holders of such bonds in the United States.
At 93 years old, Buffett has once again demonstrated his foresight, having sold a significant amount of stocks before the recent global stock market sell-off.
Berkshire Hathaway has been selling off stocks for seven consecutive quarters, and recently, the pace of selling has accelerated, with Buffett selling over $75 billion worth of stocks in the second quarter.
Many observers believe Buffett’s decision to sell top stocks like Apple serves as a warning signal, suggesting a pessimistic view on the economy and market from him.
Buffett had previously stated that during times of crisis, he would directly purchase U.S. Treasury bonds from the auction market, with maturities ranging from 4 weeks to 52 weeks.
Over the past two years, Buffett’s massive cash reserves have seen substantial returns due to rising yields on U.S. Treasury bonds. If invested in three-month U.S. Treasury bonds with a 5% interest rate, $200 billion in cash would generate approximately $10 billion in annual returns, or $2.5 billion per quarter.
Following the market impact of the COVID-19 pandemic, the Federal Reserve purchased around $5 trillion in U.S. Treasury bonds and mortgage-backed securities to help support the economy. However, since June 2022, the Federal Reserve has been reducing its asset holdings, selling off maturing treasury bonds as part of its widely-known quantitative easing program.