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By Bloomberg

Norway’s $890 billion sovereign wealth fund, the world’s biggest, is sticking to short bond maturities as markets are increasingly gripped by volatility.

The decision is designed to guard against sudden price swings that are migrating from currency markets back to bond markets, Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, which runs the fund, said in an interview in Oslo on Thursday.

“It seems that the volatility that had moved to the currency market has basically come back to the bond market again,” he said. “We have a shorter duration in our portfolio than what’s in the broader markets, so we are prepared for volatility in the bond market.”

Volatility in global bond markets is growing as monetary policies start to diverge and as stricter bank regulation curbs market liquidity. BlackRock Inc., the world’s biggest money manager, said this week that swings gripping the world’s fixed- income market are so significant that its risk models are losing relevance.

“It’s quite obvious that low interest rates, in itself, does not mean low volatility,” Slyngstad said.

Norway’s wealth fund said in April it had joined other investors in betting on an end to Europe’s historic bond rally, weighting a 2.5 trillion-krone ($324 billion) bond portfolio to shorter maturities to have it outperform when rates rise.

“In the equity market we are systematically trying to use the volatility with regards to our purchases, and in one sense be a counter-balancing force,” Slyngstad said on Thursday. “It’s not necessarily true that you want to use the same strategy in the bond market.”

Norway’s wealth fund, which gets its capital from the country’s oil and gas production and its investment guidelines from the government, is mandated to hold about 60 percent in stocks, 35 percent in bonds and 5 percent in real estate. It owned about 1.3 percent of the world’s listed equities and 2.4 percent of Europe’s at the end of last year.