Ray Dalio expects the 10-year Treasury yield to surpass 5.0%

The U.S. 10-year Treasury yield climbed to a high last seen in 2007 on Tuesday – but Ray Dalio is convinced that it could gain further in the coming weeks.

Ray Dalio shares his view on inflation

The billionaire founder of Bridgewater Associates expects the 10-year Treasury yield to eventually surpass 5.0%. His view is based primarily on inflation that he doesn’t see returning to 2.0% “without a lot of pain”.

Last month, the U.S. Federal Reserve skipped a rate hike but said rates will remain higher for longer after inflation raced back to 3.7% in August on a year-over-year basis versus 3.2% in July.

The U.S. 10-year Treasury yield is at 4.80% at writing.

Dalio’s remarks arrive shortly after Bill Ackman – another billionaire hedge fund manager said 5.5% was an appropriate yield for the U.S. 30-year Treasurys.

Dalio now sees cash as relatively attractive

Ray Dalio made the aforementioned remarks at the Greenwich Economic Forum on Tuesday.

The billionaire investor also cited supply and demand imbalance in the government debt as factors that could help the 10-year Treasury yield mount further in the coming weeks.

Note that the US10Y is broadly seen as a benchmark for mortgage rates in the United States that soared to almost 8.0% today. According to Ray Dalio, cash does look relatively attractive in the current environment.   

Also on Tuesday, Mike Mulach – a Senior Morningstar analyst told clients in a research note that they can play yields exceeding 5.0% with FBND or the Fidelity Total Bond ETF.