Prepare for US Treasury yields at 4.0%, JP Morgan's Dimon says
Investors would be well-advised to prepare for longer-term US interest rates to reach 4.0%, the head of the largest US investment bank by market capitalisation said in an interview.
In remarks to Bloomberg TV, JP Morgan Chase boss, Jamie Dimon, said that US economic growth and prices might rise quickly enough to make the Federal Reserve raise rates faster than markets were then anticipating.
It was also possible that the yield on the benchmark 10-year US Treasury note would rise to 4%.
"You can easily deal with 4% bonds and I think people should be prepared for that," he said.
Dimon pointed to the "huge shift" expected in US Treasury debt issuance to back up his argument, explaining that it would reach $400bn by the end of the year, even as the Federal Reserve, the US central bank, was reducing the size of its balance sheet.
That issuance would also come as other central banks around the world were paring back their own quantitative easing programmes.
Indeed, Dimon was at pains to stress that it was the first time ever that central banks were about to embark on reversing QE, meaning that markets would be in unchartered territory.
"[It] may cause more volatility, higher rates in a way we don't fully understand [...]
"We've never had QE, we've never had reversal."