Photographer: David Paul Morris / Bloomberg
Photographer: David Paul Morris / Bloomberg
The U.S. Federal Reserve will have to buy more bonds as an oversupply of treasury increases returns, says Ray Dalio, founder of Bridgewater Associates.
The recent fiscal stimulus announced by Biden’s government will lead to more bond sales to finance spending, exacerbating the ‘demand for bond effects, which will put upward pressure on rates’, Dalio said. On Saturday, a panel at the China Development Forum said, an annual conference hosted by the Chinese government. This will “encourage the Federal Reserve to buy more, which will show a downward pressure on the dollar,” he said.
He said the world is ‘very overweight in securities’, and they deliver minus 1 basis point in real terms, which is ‘very bad’.
“And there is not only enough demand, but it is possible that we will start seeing the sale of the bonds,” he said. “The situation is clumsy for the dollar.”
Fed Chairman Jerome Powell said this week that the current monetary policy is appropriate and there is no reason to return against a surge in treasury returns over the past month.
– Assisted by John Liu and Yujing Liu