Source: Finance Association

According to J.P. Morgan Chase statistics,$Berkshire Hathaway-A (BRK.A.US)$/$Berkshire Hathaway-B (BRK.B.US)$The purchase of US short-term treasury bonds has been aggressive in recent years. This corporate group controlled by “stock god” Buffett now has a 3% share of the entire US Treasury bill (T-bill) market.

T-bills are US federal government short-term bonds with a term equal to or less than 1 year.

J.P. Morgan's fixed income strategist said in a note last week, “Berkshire Hathaway has drastically increased treasury bond holdings over the years, and now its market share exceeds that of international organizations, stablecoin issuers, offshore money market funds, or local government investment pools.”

According to Berkshire's Q1 earnings report last month, the company's cash reserves for the first quarter rose further to a record high of $189 billion, another record high. Among them, the value of treasury notes held has further climbed to about 158 billion US dollars.

According to J.P. Morgan's estimates, as of the end of March, Berkshire held 3% of all outstanding short-term government bonds.

Because Berkshire has a large amount of cash, Buffett has become one of the most prominent investors who can successfully profit from rising interest rates: his huge cash reserves were an area of concern when interest rates were close to zero, but with short-term interest rates topping 5%, they are now earning significant returns for Berkshire.

The Federal Reserve has kept interest rates close to zero for most of the past 15 years. In March 2022, the Federal Reserve began the most aggressive rate hike since the 1980s to deal with high inflation. Since the Federal Reserve last raised interest rates in July 2023, the US federal funds rate target range has been at a high level of 5.25%-5.50%.

According to reports, Buffett buys 3- and 6-month treasury bills at the usual treasury bill auctions almost every week, and sometimes invests huge sums of 10 billion US dollars to buy them. Treasury notes sold by the US Treasury range from 4 weeks to 52 weeks (1 month to 1 year).

Berkshire has a huge business footprint in the insurance industry, always maintains sufficient liquidity when deploying excess cash into short-term instruments, and puts safety above profit.

Buffett recently reiterated once again that cash is attractive. Short-term treasury bonds are a yardstick for measuring the value of other assets: a sharp rise in interest rates actually reduces the present value of any future earnings.

The “Omaha prophet” said at the company's annual shareholders' meeting last month that compared to other assets (especially stocks), he thought cash was very attractive. By the end of the second quarter, Berkshire's cash position could reach $200 billion. “Under current conditions, I don't mind opening a cash position at all. I think if we look at the other options in the stock market and look at what's happening in the world, we'll find it quite appealing.”

editor/tolk