Ray Dalio says to fear the bond market as deficit becomes critical

Billionaire investor Ray Dalio connected Thursday sounded different alarm connected soaring U.S. indebtedness and deficits, saying it should marque investors fearful of the authorities enslaved market.

"I deliberation we should beryllium acrophobic of the enslaved market," Dalio said astatine an lawsuit for the Paley Media Council successful New York. "It's similar ... I'm a doctor, and I'm looking astatine the patient, and I've said, you're having this accumulation, and I tin archer you that this is very, precise serious, and I can't archer you the nonstop time. I would accidental that if we're truly looking implicit the adjacent 3 years, to springiness oregon instrumentality a twelvemonth oregon two, that we're successful that benignant of a critical, captious situation."

The laminitis of Bridgewater Associates, 1 of the world's largest hedge funds, has warned astir the ballooning U.S. shortage for years. Recently, investors person begun demanding little prices to bargain the bonds that screen the government's monolithic fund deficits, pushing up yields connected the debt. Rising worries astir the fiscal concern past week triggered a high-profile recognition standing downgrade from Moody's.

The output connected the 30-year Treasury output connected Thursday traded astatine levels not seen since 2023, astir 5.14%.

Rising financing costs on with continued spending maturation and declining taxation receipts person combined to nonstop deficits spiraling, pushing the nationalist debt past the $36 trillion mark. In 2024, the authorities spent much connected involvement payments than immoderate different outlay different than Social Security, defence and wellness care.

"We volition person a shortage of astir 6.5% of GDP — that that is much than the marketplace tin bear," Dalio said.

Dalio said he's not hopeful politicians would beryllium capable to reconcile their differences and lessen the country's indebtedness load. In a enactment enactment ballot aboriginal Thursday, House members approved legilsation that lowers taxes and adds subject spending. The measure — which present goes to the Senate — could increase the U.S. government's debt by trillions and widen the shortage astatine a clip erstwhile fears of a flare-up successful ostentation owed higher tariffs are already weighing connected enslaved prices and boosting yields.

"I'm not optimistic. I person to beryllium realistic," Dalio said. "I deliberation it's the essence of the situation of our state that thing related to bipartisanship and getting implicit governmental hurdles ... fundamentally means 'give maine more,' which leads to these deficits."