Billionaire investors Ray Dalio and Michael Burry issued stark warnings, cautioning that the United States faces severe financial risks from declining foreign demand for its national debt and overvalued stock markets.
Bridgewater Associates founder Ray Dalio warned on Bloomberg Television in Singapore that the U.S. Treasury market is vulnerable to reduced appetite from major international buyers like China and Japan. He noted that about one-third of U.S. public debt depends on foreign capital. He warned these pullbacks could trigger a domestic debt crisis within three years.
Foreign Holdings and Declining Demand
Data from the U.S. Treasury Department’s Treasury International Capital report shows China’s Treasury holdings dropped to $618 billion in July, marking its lowest level since 2008. Japan’s holdings also declined for a fifth consecutive month to $1.104 trillion, though it remains the top foreign creditor. Total foreign holdings slipped to $9.25 trillion across global markets.
Financial analysts and credit rating agencies have echoed these concerns. Scope Ratings recently maintained the U.S. sovereign score at AA-, noting that structural expenditure pressures and limited political will for fiscal reform are driving further deterioration. With the 10-year Treasury yield climbing higher, government debt-servicing costs continue to mount.
Foreign Holdings of U.S. Treasury Securities
- Japan: $1.1039 trillion (-$81.6 billion change vs. end-2025, Global Rank: 1)
- United Kingdom: $998.3 billion (+$135.2 billion change vs. end-2025, Global Rank: 2)
- China: $618 billion (-$66.4 billion change vs. end-2025, Global Rank: 3)
- Taiwan: $296.1 billion (-$14.5 billion change vs. end-2025, Global Rank: 10)
- All Foreign Holders: $9.2481 trillion (-$21.4 billion change vs. end-2025)
Impact on Stock Markets and Interest Rates
Heavy Treasury borrowing affects both bond and stock markets through shifting interest rates. When Treasury yields rise, investors often direct more money into fixed-income bonds instead of equities. Higher yields increase corporate financing costs and pressure stock valuations. At the same time, major technology investments in artificial intelligence provide some resilience to corporate earnings.
“The government can manage its debt at this stage, but investors question whether debt can keep rising at this pace,” said Bill Merz, head of capital markets research for U.S. Bank Asset Management Group.
As publicly held debt continues to rise relative to the gross domestic product (GDP), analysts emphasize that maintaining a diversified portfolio is essential for weathering potential market volatility. Investors are advised to balance equity exposure with high-quality bonds and keep a long-term perspective as fiscal policy debates evolve.
