Dimon Warns of Treasury Market Disruption, Predicts Fed Intervention, Similar to 2020 Bitcoin Surge
JPMorgan CEO Jamie Dimon is anticipating significant disruption in the U.S. Treasury market, a situation he believes could force the Federal Reserve to intervene, much like it did during the early days of the COVID-19 pandemic.
Speaking during JPMorgan’s Friday earnings call, Dimon highlighted concerns that the rigid banking regulations in place could trigger a “kerfuffle” in the $30 trillion Treasury market, causing significant disruptions. He stressed that the Fed may not act until there’s a considerable market panic.
Dimon’s remarks come at a time when bond yields are climbing, and market volatility is increasing. Rising yields indicate that investors are pulling back from trades that exploit the gaps between Treasury prices and futures. This is further exacerbating an already volatile market, weighed down by escalating tensions in the U.S.-China trade war.
Dimon pointed out that the current regulatory framework prevents banks from stepping in as buyers when liquidity starts to dry up. He compared the situation to 2020, when the Fed’s multi-trillion-dollar bond-buying program was introduced to stabilize the market. Dimon is advocating for reforms that would allow banks to operate more freely as intermediaries. One proposed solution is to exempt Treasuries from leverage ratio calculations, which would enable institutions to purchase more government debt without triggering capital buffer issues.
“If they don’t change the rules, the Fed will have to intervene, and I think that would be a bad policy,” Dimon said.
The Treasury market is crucial to global finance, influencing everything from mortgage rates to corporate bond yields. Dimon warned that a market freeze could have far-reaching consequences across the economy.
In the event of such a disruption and subsequent Fed intervention, Dimon suggested that some investors might turn to bitcoin (BTC) as a potential hedge against monetary instability, as was seen in 2020. After the Fed’s aggressive stimulus response during the pandemic, bitcoin’s price surged. Other factors, such as the cryptocurrency’s halving event in 2020, could have also contributed to its price rise.
