Billionaire Ray Dalio warned that the Treasury market is vulnerable to a pullback of demand from China and Japan, two of the United States’s largest foreign creditors, highlighting a potential pain point for a sector that has endured wild swings this year.

The U.S. relies on foreign capital for about a third of its debt, and a lot of that is coming from Japan and China, Dalio, the founder of Bridgewater Associates LP, said on Bloomberg Television in Singapore on Tuesday.

“The Chinese don’t want to continue to accumulate — there are geopolitical issues as well as economic issues,” he said. “When you have a debtor-creditor relationship and you have an adversary relationship, that’s a very difficult dynamic.”

He added that Japan has lent “a lot of money” that the country now wants to take back.

His comments came after U.S. Treasury Secretary Scott Bessent tried to reassure investors that a mix of economic growth and spending restraints will “very quickly” start to alter the path of U.S. government borrowing. Bessent, speaking at a fireside chat in Pennsylvania on Monday night, said the government would start “bending the curve.”

Dalio’s remarks suggest the Treasury Secretary has a long way to go to convince some investors. The Bridgewater founder repeated his warning that the U.S. faces a potential debt crisis within three years, arguing that some borrowers are already starting to feel the squeeze.

Bonds have extended their months-long slide this week. Yields on 10-year U.S. Treasuries are trading at around 5.3 per cent, hovering at levels last seen in 2002. Global bonds have lost three per cent this year, according to data compiled by Bloomberg. Treasuries have fallen 2.8 per cent in the same period.

The U.S. Treasury market has been vulnerable this year to increasing investor jitters over government borrowing and inflation risks. Similar concerns have roiled sovereign debt markets elsewhere, with France in particular becoming a trouble spot after its 10-year bonds suffered their worst quarter since the birth of the euro.

Dalio said France had “reached its borrowing limit,” adding to investor concerns that the country’s under-fire debt market was facing a moment of reckoning.

Japan — the biggest foreign owner of U.S. Treasuries — and China have already been paring their holdings.

Japan saw a US$12.8 billion drop in its Treasury holdings in July to US$1.1 trillion. That month included action by Japanese authorities to prop up the yen. Recent figures from the country’s Finance Ministry indicated that Tokyo likely sold a portion of its holdings of foreign securities to help fund its yen intervention moves.

Mainland China has seen its official Treasuries pile drop from a peak of US$1.3 trillion in 2013 to around US$618 billion in July, the third-largest foreign holding. However, market analysts suggest that figure may be an undercount as holdings of other countries such as Belgium likely include Chinese custodial accounts. The latest figures for Belgian Treasury holdings stood at US$470.7 billion.