Fed will need to buy bonds as stimulus boosts yields, says Dalio

Ray Dalio

Photographer: David Paul Morris / Bloomberg

The US Federal Reserve will have to buy more bonds as an oversupply of Treasuries raises yields, said Ray Dalio, founder of Bridgewater Associates.

The recent fiscal stimulus announced by the Biden administration will result in more bond sales to finance spending, exacerbating the “supply and demand problem for bonds, which will put upward pressure on rates,” Dalio said in a panel on Saturday. in China Development. Forum, an annual conference organized by the Chinese government. That “will prompt the Federal Reserve to have to buy more, which will put downward pressure on the dollar,” he said.

He said the world is “very overweight in bonds” and they are yielding minus 1 basis point in real terms, which is “very bad.”

“And not only may there not be enough demand, but we may start to see those bonds sell,” he said. “That situation is bearish for the dollar.”

Fed Chairman Jerome Powell said this week that current monetary policy is appropriate and there is no reason to reject an increase in Treasury yields over the last month.

– With the help of John Liu and Yujing Liu


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