The Fed will have to buy bonds as the stimulus increases yields, says Dalio

Photographer: David Paul Morris / Bloomberg

The US Federal Reserve will have to buy more bonds as an excessive supply of treasury increases 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 issue of bond supply, which will put upward pressure on rates,” Dalio told a panel in China on Saturday. Development. Forum, an annual conference hosted by the Chinese government. This will “cause the Federal Reserve to buy more, which will put downward pressure on the dollar,” he said.

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

“And not only is there not enough demand, but we may start to see the sale of those bonds,” he said. “This situation is reduced for the dollar.”

Fed Chairman Jerome Powell said this week that the current monetary policy is adequate and there is no reason to push back against the increase in Treasury yields in the last month.

– With the assistance of John Liu and Yujing Liu