Fed Will Need to Buy Bonds as Stimulus Boosts Yields, Dalio Says

(Bloomberg) — The U.S. Federal Reserve might want to purchase extra bonds as an oversupply of Treasuries drives up yields, mentioned Ray Dalio, founding father of Bridgewater Associates.The current fiscal stimulus introduced by the Biden administration will lead to extra bond gross sales to finance the spending, worsening the “supply-demand downside for the bonds, which can exert upward strain on charges,” Dalio mentioned Saturday on a panel on the China Growth Discussion board, an annual convention hosted by the Chinese language authorities. That can “immediate the Federal Reserve to have to purchase extra, which can exhibit downward strain on the greenback,” he mentioned.He mentioned the world is “very overweighted in bonds,” and they’re yielding minus 1 foundation level in actual phrases, which is “very dangerous.”“And never solely would possibly there be not sufficient demand, however it’s attainable that we begin to see the promoting of these bonds,” he mentioned. “That scenario is bearish for the greenback.”Fed Chair Jerome Powell mentioned this week that present financial coverage is suitable and there’s no cause to push again in opposition to a surge in Treasury yields over the previous month.For extra articles like this, please go to us at bloomberg.comSubscribe now to remain forward with essentially the most trusted enterprise information supply.©2021 Bloomberg L.P.

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