Ray Dalio is warning that the Treasury market could face another major challenge: fewer foreign buyers for the enormous amount of debt the U.S. government needs to sell.
- “The Chinese don’t want to continue to accumulate,” Dalio told Bloomberg Television on Tuesday. He added that Japan has “lent a lot of money” and increasingly wants some of that capital back.
Why it matters: Treasury yields are ultimately determined by supply and demand. If the U.S. continues issuing enormous amounts of debt while major foreign investors become less willing to buy it, yields may have to rise to attract other buyers.
- China has already been steadily reducing its exposure. According to Treasury data cited by Bloomberg, China’s reported Treasury holdings have fallen from roughly $1.3 trillion in 2013 to about $618 billion as of July 2026, including a decline of nearly $78 billion over the past year.
Japan could be the next concern: Japan remains the largest foreign holder of U.S. Treasuries, but rising Japanese bond yields and a stronger yen could make keeping money at home increasingly attractive. That could also undermine the popular yen carry trade, in which investors borrow cheaply in Japan and invest the proceeds in higher-yielding assets elsewhere.
- Dalio’s warning comes amid his broader concern about America’s debt trajectory. He has repeatedly warned that the U.S. could face a major debt crisis within roughly three years if policymakers don’t address deficits and borrowing.
The bottom line: The Treasury doesn’t necessarily need China or Japan to keep increasing their holdings—there are plenty of other domestic and international buyers. But losing demand from two historically important foreign creditors would mean somebody else has to absorb that debt. If investors require higher yields to do it, that could keep upward pressure on long-term Treasury yields and, ultimately, mortgage rates.