Ray Dalio warned that China and Japan could cut their demand for US Treasury bonds

The mogul and investor Ray Dalio warned that US Treasury bonds face greater vulnerability due to a potential contraction in demand from China and Japan. The reduced volume from these two largest international holders adds uncertainty and increases volatility to a sovereign curve that is already showing strong fluctuations in 2026.{#p-1791292225679-51476}

In statements to Bloomberg, Ray Dalio pointed out that the United States relies on foreign capital to finance nearly a third of its debt, with a significant portion coming from Japan and China.{#p-1791293511366-105}

In this context, the billionaire stated that "the Chinese do not want to keep accumulating ---there are geopolitical issues, in addition to economic ones---," he said. He added: "When there is a relationship between debtor and creditor and, at the same time, a relationship between adversaries, a very difficult dynamic is created." He also noted that Japan has lent "a lot of money" that it now wants to recover.{#p-1791293766836-5726}

The Detail

Dalio's comments come after Treasury Secretary Scott Bessent attempted to reassure investors by stating that a combination of economic growth and spending restrictions will begin "very quickly" to change the trajectory of US government indebtedness. Bessent indicated that the government would begin to "bend the curve".{#p-1791293815795-58491}

Dalio's comments come after Scott Bessent attempted to reassure investors by stating that a combination of economic growth and spending restrictions will begin "very quickly".{#p-1791295368850-82695}
World Economic Forum

Ray Dalio's statements suggest that the US Treasury Secretary still has a long way to go to convince the markets. In this regard, the founder of Bridgewater Associates reiterated his warning about a possible sovereign debt crisis on a three-year horizon, stating that various issuers and borrowers are already beginning to feel the impact of financial pressure.{#p-1791293951754-92472}

Bonds extended a bearish streak this week that has lasted for several months. The yield on the US 10-year Treasury bond is trading around 5.3%, at levels not seen since 2002. In terms of global returns, the fixed income market has accumulated a loss of 3% so far this year, while Treasuries have recorded a decline of 2.8% in the same period, according to Bloomberg data.{#p-1791294042837-71825}

Doubts about the sustainability of the deficit and inflation risks have kept US Treasury bonds under pressure. This volatility has spread to the fixed income of other powers: in Europe, the 10-year sovereign bonds of France recorded their worst quarter since the creation of the single currency, reflecting the deterioration of appetite for state debt.{#p-1791294112371-35175}

Dalio emphasized that France had "reached its debt limit," which adds to investors' concerns that the country's debt market, under strong pressures, is facing a critical moment.{#p-1791294132768-92771}

In 1983, he founded Bridgewater, the largest hedge fund firm in the world.{#p-1791295121657-70144}

Japan and China

Japan and China are already reducing their US sovereign positions. In the Japanese case, holdings fell by $12.8 billion during July to $1.1 trillion. Recent data from the Japanese Ministry of Finance suggests that Tokyo liquidated some of its foreign currency assets to finance its attempts to strengthen the yen.{#p-1791294237878-45566}

China's direct holdings of Treasury bonds fell from a record $1.3 trillion in 2013 to about $618 billion in July, maintaining third place among international holders. However, the market indicates that the actual volume may be masked by custody accounts in financial hubs like Belgium ---whose holdings reach $470.7 billion--- which would conceal a substantial part of Chinese assets.{#p-1791294464632-83899}

Japan and China are already reducing their US sovereign positions.{#p-1791295206020-45095}

Dalio also highlighted the increasing financing pressures faced by large technology companies investing in artificial intelligence. "They used to raise capital through equity and now need to resort to debt," he said, warning that several factors could burst the AI bubble. "Something like a wealth tax would have that effect, or having to pay back loans."

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