Ray Dalio warns of glut in debt, equity supply as US debt burden climbs

October 14, 2026 (MLN): Billionaire investor Ray Dalio has warned that the supply of financial assets, both debt and equity, is very likely to be far larger than the demand for it, with US debt burden at their heaviest since World War II and a bond bear market that still has a long way to go.

In a post on his X account, he said the numbers and the bond market since June 2025, when he published How Countries Go Broke: The Big Cycle, have broadly followed the template and projections in the book.

Countries “go broke” when debt supply far exceeds demand or when debt service squeezes out other spending, and he said both conditions are now present in the US.

Treasury supply and demand

About $32tr of marketable Treasuries were outstanding at the end of September 2026, up 8% from a year earlier.

Net new issuance stood at about $1.5tr through September and is expected to reach $2.1tr for the full year.

Bills now make up about 50% of expected issuance against a historical target of about 20%, which raises rollover risk and makes debt service costlier as rates rise.

Foreigners hold 32% of Treasuries (about $9.3tr) and the Fed holds 14%, so together they own nearly half the market, a mix the post called unhealthy. Support is shifting towards domestic buyers, while China and Japan have shifted from accumulating to reducing holdings.

Chinese companies and individuals are estimated to hold about $1tr in US bonds, with another $2tr in reserves, so a hedge or conversion of just 10% of private holdings would mean $400bn of dollar selling.

Japan holds about $1.1tr, and since over half is currency-hedged, repatriation could unwind carry trades and disrupt markets. Foreign buying is not expected to adequately support US bonds.

Debt service and rollovers

U.S Federal debt is projected at 579% of government revenue in 2026, rising to 590% in 2027 and 608% in 2028.

Net interest outlays rose $78bn, or 10%, in the first three quarters of FY2026.

The average rate on existing debt is about 3.5% against market rates of 4–5.5%, so the interest bill will keep climbing even if rates stay put. A one percentage point rise would add about $310bn to annual interest costs and about $3tr of debt over 10 years.

Maturing debt of $10tr in 2026, rising to $11.1tr in 2027 and $12.5tr in 2028, is a bigger and less understood risk, since lower reinvestment would work like a bigger deficit.

Corporate, AI and equity supply

Total net new US debt supply is estimated to rise from $3.5tr in 2025 to $4.1tr in 2026 and $4.4tr in 2027. The 2027 total includes $2.1tr for the federal government, $1.4tr for nonfinancial corporates, $0.7tr for households and $0.2tr for state and local governments.

Gross corporate bond issuance is up almost 30% this year on the AI investment boom.

AI hyperscaler bond issuance reached about $220bn in the first half of 2026 against about $108bn in all of 2025, and investors are demanding larger concessions. Equity issuance has surged to a $1.8tr annualised pace, led by AI players across IPOs, secondary offerings and private fundraising.

OECD governments borrowed a record $17tr gross in 2025, about $13.5tr of it refinancing, and gross borrowing is projected at about $18tr in 2026. Government debt outside the US is projected to rise from $72.4tr in 2025 to $83.6tr in 2027.

Germany is expected to issue about €576bn gross in 2027 against €526bn in 2026 and €425bn in 2025, while the ECB shrinks its bond holdings.

Ray Dalio emphasized that US is in the part of the cycle where rates have risen sharply but stocks, credit spreads and the economy have not yet weakened.

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