Billionaire hedge-fund founder Ray Dalio on Thursday urged investors to "be afraid of the bond market," arguing that the United States is entering a "very, very serious" debt spiral that could spark a funding crisis within three years.
What Happened: Speaking at a Paley Media Council forum in New York, the Bridgewater Associates founder, speaking with CNBC, likened the federal balance sheet to "a patient whose vital signs are flashing," and said deficits near 6.5% of GDP are more than global buyers can absorb.
“I would say that if we're really looking over the next three years, to give or take a year or two, that we're in that type of a critical, critical situation," he added.
Dalio's diagnosis follows a string of red flags, which include a weak $16 billion sale of 20-year Treasurys on Wednesday, which yanked the 30-year yield above 5% for the first time since 2023, and Moody's downgrade of U.S. sovereign debt to Aa1 last week. Investors are now demanding steeper discounts to finance a national debt that has punched past $36 trillion, Treasury data shows.
Much of the pressure comes from Capitol Hill. The House on Thursday squeaked through President Donald Trump's "Big, Beautiful Bill," a tax-and-spending package that the Congressional Budget Office estimates would widen the deficit by about $3.8 trillion over a decade. The vote immediately spooked bond traders, pushing 30-year yields to 5.15%.
Why It Matters: Dalio, who also blasted Moody's cut as too mild, argues that ratings agencies underplay the bigger hazard—Washington's temptation to “print money” to pay its debts, eroding bondholders' real returns. If investors dump Treasurys en masse, he said, “there probably will not be enough demand” to fund new issuance.
Long-dated Treasury ETFs have slumped to 19-month lows, while a spike in yields wiped nearly $200 billion from growth-stock valuations in a single hour on Wednesday. Dalio cautioned that such volatility could intensify if Congress fails to craft a bipartisan fiscal plan. "Anything that means ‘give me more' widens the hole," he said.
With key Senate votes and another slate of Treasury auctions looming, traders are bracing for further turbulence.
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