Dimon Sees Treasury Market ‘Kerfuffle’ The place Fed Steps In

(Bloomberg) — JPMorgan Chase & Co. Chief Govt Officer Jamie Dimon stated he expects “a kerfuffle” within the US Treasury market that prompts a Federal Reserve intervention.

“There might be a kerfuffle within the Treasury markets due to all the principles and rules,” Dimon stated Friday on an earnings name. When that occurs, the Fed will step in — however not till “they begin to panic just a little bit,” he added.

Yields, particularly on longer-term debt, have jumped this week amid broader market turmoil tied to President Donald Trump’s evolving tariff coverage. The strikes have raised questions in regards to the debt’s protected haven enchantment and stoked fears that hedge funds and different traders could also be unwinding a pair of widespread leveraged trades — one on the value distinction between money Treasuries and futures, and one other on the unfold between Treasury yields and swap charges.

Hearken to the Right here’s Why podcast on Apple, Spotify or anyplace you hear.

In March 2020 with Covid engulfing the world, the Treasury market seized up as traders quickly unwound their positions. The Fed was pressured to intervene, pledging to purchase trillions of {dollars} of bonds and offering emergency funding to the repo markets. Dimon stated financial institution rule modifications are wanted to keep away from that occuring once more.

“When you will have a variety of risky markets and really large spreads and low liquidity in Treasuries, it impacts all different capital markets,” Dimon stated. “That’s the rationale to do it, not as a favor to the banks.”

One of many speculated modifications that regulators underneath Trump might pursue is exempting Treasuries from the US banks’ supplementary leverage ratio, permitting corporations to purchase up extra of the debt and not using a hit to their key capital ratios.

Dimon stated the difficulty isn’t just with the SLR, and listed a slew of rules with “deep flaws” that he stated required reforms so banks may grow to be extra energetic intermediaries in markets.

“In the event that they do, spreads will are available, there’ll be extra energetic merchants,” he stated. “In the event that they don’t, the Fed should intermediate, which I believe is only a unhealthy coverage concept.”

The selloff in Treasuries intensified Friday as traders continued to retreat, with the yield on 10-year notes — a benchmark for the price of every part from company bonds to mortgages — rising as a lot as 16 foundation factors to just about 4.6%, earlier than paring the soar. The 30-year fee climbed as a lot as 12 foundation factors to just about 5% earlier than additionally paring that transfer.