Jamie Dimon’s Stark Rate Hike Warning: Treasurys “Will Be Violently Volatile” When Rates Rise

Jamie Dimon’s Stark Rate Hike Warning: Treasurys “Will Be Violently Volatile” When Rates Rise

Tyler Durden’s pictureSubmitted by Tyler Durden on 09/18/2015 13:34 -0400
http://www.zerohedge.com/news/2015-09-18/jamie-dimons-stark-rate-hike-warning-treasurys-will-be-violently-volatile-when-rates

Earlier this year in his letter to shareholders, Jamie Dimon jumped on the bond market liquidity warning bandwagon.

As you may recall, Dimon spoke out not only about the lack of liquidity in corporate credit markets (something which is always fun for sellsiders because it provides a nice “told you so moment” with regard to the Volcker Rule’s attempt to deter “evil” prop trading), but also about Treasury market depth and the rather disconcerting fact that six sigma events are happening in rapid succession. As a refresher, here are the notable excerpts:

The likely explanation for the lower depth in almost all bond markets is that inventories of market-makers’ positions are dramatically lower than in the past. Dealer positions in corporate securities are down by about 75% from their 2007 peak, while the amount of corporate bonds outstanding has grown by 50% since then.

Recent activity in the Treasury markets and the currency markets is a warning shot across the bow

Treasury markets were quite turbulent in the spring and summer of 2013, when the Fed hinted that it soon would slow its asset purchases. Then on one day, October 15, 2014, Treasury securities moved 40 basis points, statistically 7 to 8 standard deviations – an unprecedented move – an event that is supposed to happen only once in every 3 billion years or so (the Treasury market has only been around for 200 years or so – of course, this should make you question statistics to begin with). Some currencies recently have had similar large moves. Importantly, Treasuries and major country currencies are considered the most standardized and liquid financial instruments in the world.

Indeed, last October’s Treasury flash crash was a wake up call to quite a few market participants and served to validate two concerns we’ve been pounding the table on for years: 1) the presence of nefarious algos across markets means flash crashes are no longer anomalous but in fact part and parcel of today’s broken markets, and 2) the Fed’s move to suck every last vestige of high quality collateral out of the market has led to an acute lack of liquidity.

Or, visually:

Now, Dimon is back at it, warning that when (or maybe “if” is more appropriate) rates start to rise, Treasurys could sell off “violently”. Here’s more, via Bloomberg:

Jamie Dimon, JPMorgan Chase & Co.’s chief executive officer, said the bank will be prepared for the possibility that Treasury prices move violently when interest rates rise.

“The one thing I do worry a little bit about, by the way, is Treasuries,” Dimon said Friday at a conference in New York sponsored by Barclays Plc. “Interest rates have been so low, for so long,” he said, adding that some traders and their managers have never experienced a rising interest-rate environment.

“So I wouldn’t be shocked to see 10-year Treasuries, when rates are going up, people change their mind, they change direction, that they will be violently volatile and go up much faster than people think,” Dimon said. “I’m not predicting that. I’m simply saying in the back of my mind, I think that’s a possibility.”

So while Dimon is worried that “some traders and their managers” have never seen a rate hike – something we warned about back in May – we’re sure no one at JP Morgan falls into that category, and besides, the bank is great at hedging tail risk…

10 comments

  • theunhivedmind

    Jamie Dimon is a New Venice (Britain) financial terrorist controlling the United States from Wall St under orders from the City of London power aka the New Venice Empire. Jamie was correct about a rate hike would cause an implosion in their derivative based economy which is only be held up for now on the backs of the people. We could have a rate hike at any time and not suffer a thing with the people. How? Implement the Glass Steagall Act and then only the ponzi debt slavery goes down the tubes without taking out the people and releasing mankind from slavery to banksters via debt.

    ☆´¨)
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  • keenly

    What do you think of this? Written by Paul Jenkinson to K. Hudes

    https://s3.amazonaws.com/khudes/twitter9.16.15.1.pdf

    • theunhivedmind

      Even if the Bradbury Pound has been used to help fund a war or something else bad then does this make credit currencies a bad thing? How can one truly develope with a strict Gold standard? What if we used our credit currencies for development not war or slavery? Why worry about economies getting hindered by fractional banking? Why can’t we every seven years do a debt jubilee as called for in the original Bible teachings and something on the lines of the Shemitah of the Torah? If the merchants followed those rules then why would we have to worry? It’s only because those merchants have decided to dump the rules and take everything from the people. Now this character attacking the BCG is someone who I wouldn’t trust and someone who’s trying to somehow bundle the BCG in with NGOs. Now you will find that NGOs are actually government controlled fronts for social engineering that suits the establishment agenda. The British Constitutional Group is nothing of the sort and they’re trying very hard to bring sovereignty to Britain. To me this article or email is another attempt to smear truth and those who are making a real difference. Karen Hudes is also someone I don’t trust in the slightest. Karen uses mostly our information and then repackages it as her own as if she’s learned it from high up sources etc. Karen Hudes isn’t working with the BRiCS like she should be and she’s pushing alien talk which is probably mostly disinformation and a diversion. Why talk about long headed aliens running the world and not even mention the neanderthal DNA beings actually in positions of power like Henry Kissinger and other vile Zionists? Which would be more important to expose do you think? I rest my case and I’m pretty sure Brian Gerrish didn’t want her on his show for similar reasons. Oh and before I forget you cannot have a gold standard without the use of silver and even then there can be downfalls if you need serious development etc.

      ☆´¨)
      .·´ ¸.·★¨) ¸.·☆¨)
      ★(¸.·´ (¸.*´ ¸.·´
      `·-☆ The Unhived Mind

      • keenly

        Karen never said aliens run anything. She said there is a professor who believes a separate race of homo capiens run things. She quickly moved on from that and does not deal with anything alien. I will pass on your thoughts. Karen is genuine, I have spoke to her, that does not mean she is always right. She is also being contacted by many people trying to discredit her, just like the professor with the homo capien stuff. Remember you suffered the same fate when contacted by Vittorio? It is the same scenario. People want to use you to mix some new info with some bullshit.

        Regarding British Constitution group, Bill Maloney and others; there has been some in fighting there as well.

        I think there’s many genuine people trying to find solutions to the mess we are in, but they do not all agree, and of course they will be infiltrated.

        • keenly

          Here is reply; from Paul who wrote original piece; ‘gold as money encourages efficiency, invention & a desire for quality. You don’t exchange gold for any old tat’.

          From Karen; ‘This is not a gold standard. It is gold currency. There are also local currencies. We are ending legal tender laws’.

          • theunhivedmind

            This all reminds me of all the hate that was thrown at Alexander Hamilton who bought about the credit currency and helped make the United States great. If it wasn’t for Hamilton there wouldn’t have even been a George Washington. Isn’t it interesting how the Prometheans who’re making a real difference with the BRICS now follow the Hamiltonian principle not to mention the leadership of the Peoples’ Republic of Donetsk. I’ll wait to see what the BRICS come up with for the new economy based on labour, barter and development as you can rest assured the minds behind the BRICS know exactly what they’re doing.

            I don’t care if a currency is backed by Gold or another form of funny money as long as mankind can improve and new technologies are bought forth all aided by development. The truth of the matter is that the people only complain about fiat currencies because right now those financial instruments are being misused for enslaving purposes. If these fiat currencies were working for the people then nobody would give a damn. If all counter measures are put in place then we can easily live quite happily on fiat fractional banking. We don’t need to destroy the Federal Reserve we just need to nationalize it and remove its Zionist controllers such as the Warburg family. We have to think wider and outside of the alternative media paranoia that has been designed to further enclose your mind to the ideal of real workable solutions. Merchants of great wisdom realized that fiat currencies were the way forward to defeat the pitfalls of other systems of commerce such as gold. The problem lies with the slave masters using a good idea to do wrong by enslaving people which started from 1931 stemming from New Venice (Britain) outwards into the United States in 1933 and then the world from the 1940s onwards but which truly started with the Treaty of Versailles from 1919 and the plan to enslave the world to debt starting with Bizmarck’s Germany which once again was going the way of the Hamiltonian principle until New Venice put a stop to that.

            ☆´¨)
            .·´ ¸.·★¨) ¸.·☆¨)
            ★(¸.·´ (¸.*´ ¸.·´
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    • theunhivedmind

      Lyndon LaRouche has his mission and I personally think the man is a complete genius but I don’t agree fully with some of his work like when he will mention events using the third truth (lie) given by the Government like the death of Osama Bin Laden. You won’t find a more finer source of intelligence than the Executive Intelligence Review under Jeffrey Steinberg. Lets face the facts and those are LaRouche is feared by the establishment and he was jailed by the Nazi Scherff (Bush) family so of course this man is onto something. If you want solutions then Lyndon is your man without a shadow of a doubt and that’s why the non-aligned movement listen to him and now base their new system on his work. I just hope Lyndon can continue his work as he gets even older as I’ve noticed he’s been struggling the last two weeks since his ninety-third birthday. What a genius and he still has his mind even today, I truly hope he gets to see his dream played out thanks to Putin.

      ☆´¨)
      .·´ ¸.·★¨) ¸.·☆¨)
      ★(¸.·´ (¸.*´ ¸.·´
      `·-☆ The Unhived Mind

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