HONG KONG, June 6 (ETtoday) — Ray Dalio, founder of Bridgewater Associates, warned that the U.S. Treasury market is vulnerable to reduced demand from China and Japan, which could become a potential pain point for the already volatile U.S. bond market this year.

    Dalio said in an interview on Tuesday that about one-third of U.S. debt financing relies on foreign capital, much of which comes from Japan and China. He noted that geopolitical factors mean China is reluctant to continue increasing its holdings of U.S. debt, while Japan now wants to repatriate large amounts of funds previously “lent out.”

    Dalio warned that the U.S. could face a debt crisis within three years. Currently, a global sell-off in government bonds, including U.S. Treasuries, has driven borrowing costs to multi-year highs. Inflation, fiscal spending, and resilient economic growth have weakened market demand for fixed-income securities.

    Dalio also stated that expected returns on stocks and bonds are now converging, and he expects stock markets to become more sensitive to interest rate changes, as the world enters a new era of using artificial intelligence for investment. (rc)