The world’s biggest hedge fund is warning that the recent sell-off in US government bonds could accelerate, in a shift that threatens high-flying assets including blank cheque companies and cryptocurrencies.
Bob Prince, who runs Bridgewater Associates with Ray Dalio, told the Financial Times that a new phase of the downturn in the $21tn Treasury market looms as economic growth improves and inflationary pressures push the Federal Reserve to consider reeling back its stimulus measures.
The rally in risky assets, which has been running for nearly a year, “really depends on . . . whether [the Fed] bumps into constraints”, said Prince, “which will typically be inflation, currency deflation or call it the bond vigilantes, where people just say, ‘Hey, forget it. With that much [money] printing I just don’t want to own bonds.’”