MW JPMorgan's Jamie Dimon warns Fed may need to step in to support bond market - without this fix
By Joy Wiltermuth
JPMorgan Chase & Co. Chief Executive Jamie Dimon on Friday said sharp volatility in the roughly $29 trillion Treasury market could require the Federal Reserve to step in with support for the bond market if banking rules with "deep flaws" remain unchanged.
The comments were made after a bank analyst asked about weakening global demand for Treasurys and volatility in longer-duration yields during JPMorgan's $(JPM)$ first-quarter earnings call. Dimon responded by saying that without proposed regulatory relief, the Fed may need to act.
"If they don't, the Fed have to intermediate - which I think is just a bad policy idea, that every time there's a kerfuffle in the markets, the Fed has to come in and intermediate," Dimon said.
Extreme volatility has been hitting U.S. stocks, bonds and other assets, and temporarily raised liquidity concerns earlier this week. President Trump on April 2 proposed new tariffs against U.S. trading partners that shocked markets, but then he backed off with a pause as tumult increased.
Read: The collapse of dollar shows 'the biggest damage right now is to the U.S. brand'
Dimon has long been an advocate of easing regulations in the banking sector, including calling for changes to how Treasurys are treated under the so-called supplementary leverage ratio. Fed Chair Jerome Powell recently said changes could help improve the Treasury market's functioning.
Expectations for eased banking rules under Trump's second term had been high, until Trump first focused on tariffs and reordering U.S. trade. Hopes were so strong for regulatory relief at banks that it even helped popularize a new "basis trade" in Treasurys, which was swept up in volatility this week.
Check out: How the 'trade of the year' became a nightmare for investors after Trump's tariffs
Dimon said his staff has been watching the bond market "every minute." He also told analysts to "remember, it's not relief to the banks, it's relief to the markets," regarding proposed changes to rules for banks.
JPMorgan's 2024 annual CEO letter to shareholders said the "liquidity coverage ratio treats all other securities and loans as riskier than they are," which discourages banks from acting as intermediaries, potentially "at precisely the wrong time."
Of note, China has been a huge owner of U.S. Treasurys, but it was excluded from Trump's 90-day reprieve, resulting in ramped up tariffs with the U.S. ahead of the weekend.
Tariffs and other Trump policies could alienate buyers of Treasurys, which risks raising borrowing costs when the U.S. needs to refinance an estimated $7.5 trillion in coupons over the next three years, according to an LPL Financial estimate from February.
There's been a fear of a potential buyer's strike from foreign investors in Treasurys. Yields on longer 10-year BX:TMUBMUSD10Y and 30-year BX:TMUBMUSD30Y securities have shot higher this week, while the U.S. dollar DXY has tumbled and stocks SPX DJIA COMP have endured extreme swings.
Tariff uncertainty also has cast a long shadow over consumer sentiment, the U.S. economy and first-quarter earnings.
Related: JPMorgan CEO Jamie Dimon warns tariffs and trade war are causing 'considerable turbulence' in the economy
-Joy Wiltermuth
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April 11, 2025 15:36 ET (19:36 GMT)
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