Global bond crisis ahead? JPMorgan CEO Jamie Dimon rings alarm over rising government debt

As Iran-US war continues to rattle markets and push oil prices higher, JPMorgan Chase CEO Jamie Dimon warned that the world may be heading towards a global bond crisis amid rising government debts across the globe.

"The way it is going now, there will be some kind of bond crisis, and then we will have to deal with it," Dimon was quoted as saying by CNBC at an investment conference held by Norway’s sovereign wealth fund. "I am not that worried we will be able to deal with it. I just think maturity should say you should deal with it, as opposed to let it happen," he added.

Jamie Dimon on what can trigger the global bond crisis

The veteran banker said history shows that today's growing mix of risks could combine in unpredictable ways. While nobody knows when this crisis will unfold, Dimon said that geopolitics, oil, government deficits and several other factors are already adding on to the risk, that can trigger the beginning of the crisis. "They may go away, but they may not, and we don’t know what confluence of events causes the problem," he said.


A bond crisis will likely result in a sharp jump in bond yields, which may led to investors rushing to bond markets from equity markets. While Dimon doesn't see private credit large enough to pose a systemic risk to the American economy, the banker noted that the larger risk was that a downturn across all lending segments would be harsher than expected. "We have not had a credit recession in so long, so when we have one, it will be worse than people think. It might be terrible," he was quoted as saying.

US bond yields rise

Dimon’s warnings come as oil prices continue to hover around $110 per barrel, keeping inflation worries alive. Yields on longer-term US government bonds have remained elevated for a long period of time since the onset of the war in the Middle East. US Treasury yields hit a three-week high on Tuesday, amid rising doubts over a near-term resolution to the US-Iran war.

The two-year note yield, which typically moves at par with Federal Reserve interest rate expectations, rose 3.9 basis points to 3.844%. The yield on benchmark US 10-year notes grew 2.2 basis points to 4.358%.

Rising public debt

Recently, the International Monetary Fund (IMF) said that global public debt is on track to cross 100% of GDP by 2029, returning to levels last seen after the World War II, as successive economic shocks continue to strain government finances worldwide amid the raging war in the Middle East.

Markets are currently awaiting the outcome of the Federal Reserve’s FOMC meeting later today, when the American central bank is expected to keep rates unchanged as policymakers weigh the prospect of higher inflation against the softness in the labor market.

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