Ray Dalio, the founder of Bridgewater Associates, has expressed concerns that the risk to U.S. Treasurys is greater than what Moody’s Investors Service has indicated. Dalio believes that the recent downgrade of the U.S. credit rating by Moody’s does not fully account for the potential consequences of the federal government printing money to handle its debt. Moody’s downgraded the U.S. sovereign credit rating from Aaa to Aa1, pointing to a growing federal budget deficit and rising interest payments.
This downgrade marked the end of the U.S.’s highest possible rating status across all three major credit agencies.
Dalio’s perspective on U.S. debt risks
Dalio explained that credit ratings often fail to consider the risk of countries choosing to print money to manage their debts, which can lead to a significant devaluation of the currency and losses for bondholders.
“You should know that credit ratings understate credit risks because they only rate the risk of the government not paying its debt,” Dalio said. “They don’t include the greater risk that countries in debt will print money to pay their debts, thus causing holders of the bonds to suffer losses from the decreased value of the money they’re getting.”
The market quickly responded to Moody’s downgrade, with 30-year Treasury yields increasing to 4.995% and the yield on the 10-year note rising to 4.521%. Dalio stressed that for those worried about the value of their investments, the risks associated with U.S. government debt are more significant than what the credit agencies are reporting.
Bridgewater’s assets under management have experienced a notable decline, falling 18% in 2024 to around $92 billion, down from a high of $150 billion in 2021.
