“The IMF said on Thursday that it will begin investing its reserves in a portfolio of fixed-income securities to bolster its declining income.

The global lender said it will transfer US$8.7 billion in reserves into a newly approved investment account in a move to broaden its investment base and plug an income deficit that will reach US$116.3 million this year. The IMF said it would make investments in major government bond markets over several months.

‘I would not expect this to have a major impact on the bond markets,’ an IMF official said, adding that the amount was large for any institution but small for overall bond markets.

The official said the investments would primarily be in domestic government bonds of countries in the euro area, Japan, Britain and the United States.

It would also invest in bonds of eligible national agencies and international financial institutions like the World Bank and Bank for International Settlements (BIS).

To minimise the impact on foreign exchange rates, the Fund said it would keep its investments aligned with its Special Drawing Rights (SDR) basket of currencies, which holds US dollars, euro, yen and pound sterling.

The IMF official said the new investment strategy would not affect the Fund’s 103.4 million ounces of gold reserves, which some countries, like the Netherlands, have proposed selling to generate additional investment income.

One possibility, the IMF said, was to sell ‘sufficient gold within an agreed timeframe to hold investments’.

‘At current market prices, this could require a gold sales programme of about 11-12 million ounces, or roughly 11 per cent of the Fund’s total holdings,’ the IMF said. ‘Any such programme would need to be carefully designed to limit any market impact.’”