Billionaire investor Ray Dalio believes risks are rising in U.S. government bonds as the U.S. sinks deeper into its debt crisis. “I think it’s a very risky investment,” Dalio said Monday when asked about U.S. Treasuries on CNBC’s “Squawk on the Street.” “The risk is not measured by whether you pay back the money. Their only obligation is to give you the money they can print. History has shown time and again that when you are in a position where the government cannot pay you back, but their obligation is to pay back (what) to print Machines can be produced.” The founder of Bridgewater Associates, the world’s largest hedge fund, said that debt service payments on U.S. Treasury bonds are increasingly eroding government spending. At the same time, the rapid rise in interest rates has led to huge losses for institutions, including the Federal Reserve, he said. “The Fed’s losses are largely due to holding bonds that have declined in value, so losing money and funding at exorbitant rates,” Dalio said. Another factor, the widely followed investor said, is the potential for sanctions on foreign countries that buy U.S. Treasuries. “Other countries are still increasingly concerned about sanctions,” Dalio said. “If you get them to sell bonds, that’s going to be a real problem. So because that means either interest rates go up more, the central bank has to step in and print a lot of money. That’s something we have to be wary of,” Dalio said. Stocks tend to outperform government bonds in this environment. In 1971, when President Richard Nixon ended convertibility of the dollar into gold, the stock market rallied, he recalled. “Currency valuations, money printing, etc. support stocks relative to bond markets. It devalues currencies,” Dalio said. The S&P 500 has rallied more than 12% this year and is back above 4,300, near its highest level since August. .SPX YTD Mountain SPX 2023