Ray Dalio warns that China and Japan could curb US Treasury demand

Ray Dalio, the founder of Bridgewater Associates, cautioned that demand for US Treasury securities could weaken as China and Japan scale back their positions, a shift he described as a potential pain point for the market. He explained that China’s reluctance stems from both economic concerns and strained geopolitical relations, while Japan is seeking to reclaim funds it previously lent. Recent data show Japan’s Treasury holdings fell by $12.8 billion in July and China’s official holdings have dropped to about $618 billion, though analysts suspect the true figure may be higher.

Dalio also warned of a possible US debt crisis within three years, noting that bond yields have risen to roughly 5.3% on the 10-year note. Treasury Secretary Scott Bessent has tried to reassure investors, but Dalio’s remarks suggest lingering doubts about the sustainability of US borrowing. The situation mirrors stress in other sovereign markets, such as France, where bond yields have surged sharply.