Jamie Dimon warns of the coming ‘bond crisis’ as global debt risks rise

JPMorgan Chase CEO Jamie Dimon warned Tuesday that rising government debt levels could lead to a bond market crisis, urging policymakers to act before markets force their hand.

Dimon’s statement came in response to a question about whether he was concerned about rising levels of government debt “around the world and in your country.”

“The way things are going now, there will be some kind of bond crisis, and then we will have to deal with it,” Dimon said at an investment conference held by the Norwegian sovereign wealth fund, the largest in the world.

“I’m not worried that we’ll be able to handle it,” Damon said. “I just think maturity should say you have to deal with it, rather than letting it happen.”

Dimon, who runs the world’s largest bank by market value, said history has shown that today’s growing mix of risks can combine in unpredictable ways. Although the timing is uncertain, failure to address these pressures increases the likelihood that adjustment will come after unrest rather than deliberate political moves.

“The level of things that add to the risk column is high, like geopolitics, oil, government deficits,” Dimon said. “It may go away, but it may not go away, and we don’t know what confluence of events is causing the problem.”

A bond crisis is likely to mean a sudden jump in yields and a collapse in market liquidity, as investors rush to sell and buyers retreat, typically forcing central banks to step in as buyers of last resort.

A recent example of this is the UK government bond crisis of 2022, when yields on British government bonds rose and the Bank of England was forced to intervene to stabilize the market.

In the wide-ranging interview, Damon addressed the risks he saw in the credit cycle, the pace of AI adoption, and his vision for defining corporate culture.

Although he did not believe that private credit, amounting to about $1.7 trillion, was large enough to pose a comprehensive risk to the US economy, he said that the greatest risk was that the decline in all categories of lending would be more severe than expected.

“We haven’t had a credit recession in a long time, so when we do, it’s going to be worse than people think,” Dimon said. “It could be terrible.”