Billionaire investor Ray Dalio is warning that the US Treasury market is exposed to a drop in demand from China and Japan.
The Bridgewater Associates founder says the US depends on foreign capital for about a third of its debt, with much of that money coming from Japan and China, reports Bloomberg.
Dalio tells Bloomberg Television that geopolitical tensions mean China no longer wants to keep adding US debt to its holdings.
He says Japan has lent “a lot of money” that it now wants to bring back home.
Since the start of the year, China and Japan have reduced their holdings of US treasuries by a combined $198.7 billion. Japan, which is the largest foreign creditor to the US, held $1.1039 trillion in US treasuries as of July. China is the third-largest foreign creditor to the US and as of July held $618 billion in US treasuries.
Dalio also repeated his warning that the US could face a debt crisis within three years.
His comments come as a global bond selloff pushes government borrowing costs to multi-year highs.
The yield on the 10-year US Treasury is hovering around 5.3%, a level not seen since 2002.
Inflation, fiscal spending and resilient economic growth have weakened demand for bonds around the world.
Bond prices have kept falling this week, extending a slide that has lasted for months.
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