Markets, Jamie Dimon, JPMorgan Chase, U.S. Treasurys The JPMorgan CEO says inflexible banking guidelines could set off a Treasury market freeze, echoing 2020’s turmoil that was adopted by BTC’s worth rise.
JPMorgan Chase CEO Jamie Dimon is bracing for a disruption within the close to $30 trillion U.S. Treasury market — one he says may drive the Federal Reserve to step in, simply because it did throughout the early days of the COVID-19 pandemic.
“There will be a kerfuffle in the Treasury markets because of all the rules and regulations,” Dimon mentioned in a Friday earnings call, warning that the Fed received’t act till “they begin to panic just a little bit.”
Dimon’s feedback come as bond yields spike and market volatility rises. The rising yields have urged traders are pulling again from standard trades that exploit gaps between Treasury costs and futures, including stress to a market already rattled by commerce tensions below the escalating U.S.-China commerce conflict.
Dimon mentioned present rules are retaining banks from stepping in as consumers when liquidity dries up. In 2020, an identical scenario pressured the Fed to launch a multi-trillion-dollar bond-buying program to maintain the market functioning.
He’s pushing for reforms that will let banks act extra freely as intermediaries. One thought below dialogue is exempting Treasuries from leverage ratio calculations, which may permit establishments to purchase extra authorities debt with out hitting capital buffers.
“If they don’t [change the rules], the Fed will have to intermediate, which I think is just a bad policy idea,” Dimon mentioned.
The Treasury market performs a central position in international finance, setting the tone for all the pieces from mortgage charges to company bond yields. Dimon warned that if the system locks up once more, the results may ripple throughout the economic system.
A Treasury market disruption that results in Fed intervention may drive some traders towards bitcoin (BTC), which is usually seen as a hedge in opposition to financial instability. That seems to have been the case in 2020, when bitcoin’s worth surged following the Fed’s aggressive stimulus response. Others elements, together with the cryptocurrency’s 2020 halving influence, may have additionally factored into bitcoin’s worth bounce.
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