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Jamie Dimon has warned that the US bond market will “crack” under the weight of the country’s rising debt as he called on Donald Trump’s administration to place America on a more sustainable trajectory.
The JPMorgan Chase chief executive said on Friday that he had cautioned regulators: “You are going to see a crack in the bond market.” He added: “I’m telling you this is going to happen. And you are going to panic. I’m not going to panic. We’ll be fine.”
The warning from the head of the US’s biggest bank about mounting risks for the US bond market — which sets borrowing costs for trillions of dollars in debt globally — underscores how Wall Street is growing increasingly uneasy about rising government debt levels. It comes as Congress is reviewing Trump’s “big, beautiful” budget bill, which if passed is broadly expected to markedly increase the federal deficit.
Even before the introduction of the legislation, which was voted through by the House last week and is under review in the Senate, the Congressional Budget Office had projected that US debt as a share of GDP would exceed the 1940s era peak in coming years.
Long-term US bonds have come under pressure over fiscal worries, with the 30-year Treasury yield trading at about 5 per cent from just over 4 per cent at the start of 2024. Rating agency Moody’s also this month stripped the US of its triple-A credit rating.
The Treasury bond market has grown from roughly $5tn in 2008 to $29tn today as the government has cut taxes while increasing spending — particularly during the coronavirus pandemic. The market is the deepest and most liquid in the world and has long benefited from the privilege of the dollar being the world’s reserve currency.
But as the debt load has risen, demand has also taken a hit. Foreign investors have steadily been pulling back from the Treasury market over the past decade, a move that has been hastened by Trump’s tariff policy.
Dimon said rising geopolitical tensions, trade wars and soaring debt levels worldwide meant the “tectonic plates” of the world economy were shifting.
“I just don’t know if it’s going to be a crisis in six months or six years,” he said at the Reagan National Economic Forum in California, calling on the government to “change the trajectory of the debt” and urging regulators to ease restrictions on banks to boost their capacity for bond trading. “I think we can make everything better, including that, by just changing and modifying some of these rules and regulations.”
His comments echo those of Goldman Sachs president John Waldron, who earlier this week described the rising US deficit as “somewhat concerning” and warned its impact on the bond market was “the big risk on macro right now”.
“I think we are going to run larger deficits pretty clearly, as far as the eye can see, and we are going to have more Treasury borrowing,” said Waldron, who is Goldman’s second-in-command behind David Solomon. “The big risk is long-run rates continuing to back up and the cost of capital in the economy rising and fundamentally becoming more of a brake on economic growth,” he told the Bernstein conference in New York.
Trump’s budget bill would add at least $3.3tn to the US debt by 2034, according to the independent Committee for a Responsible Federal Budget. Moody’s has warned the bill would push the US deficit from 6.4 per cent of GDP last year to just under 9 per cent by 2035.
Dimon also said that the US should increase tax on carried interest, a provision in the tax code that benefits private equity executives.
Trump has endorsed the idea, which has long been a goal of Democrats including former president Barack Obama. “We absolutely should be taxing carried interest,” Dimon said. Asked if he would consider running for office, Dimon, 69, said he would “if I thought I could really win, which I don’t think I could”.
