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Jamie Dimon Understands That His Future President Self May Have To Deal With A Recession And/Or Higher Yields

"Someone asked me once, what's the odds of a recession? I said it's 100 percent."
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Future President of the United States and current man who is 364 times richer than the median person who works for him and an undisclosed number of times richer than Mike Mayo, Jamie Dimon, thinks it's possible that 10Y yields will hit 4% in the U.S.

Why you should give a shit about that largely meaningless headline is anyone's guess, but apparently a lot of people care because it's all over the place on Tuesday.

Here's what Dimon told Bloomberg TV's Stephen Engle during an interview in Beijing:

[If the Fed hikes more than expected] it might force the 10-year up. You can easily deal with 4 percent bonds and I think people should be prepared for that.

Ok. You have been thusly warned. Of course the possibility of higher 10Y yields has been all anyone has been talking about this year and as I wrote late last month, this dead horse has been beaten to the point where it can now be characterized in "more cowbell" terms (to mix farm metaphors).

The rest of Dimon's comments on the subject were similarly plain vanilla. Obviously if yields are rising on growth expectations that's better than if they're rising due to inflation jitters or due to an acute distortion of the supply/demand dynamics in the Treasury market thanks to the combination of increased supply (to fund Trump's tax cuts) and Fed balance sheet rundown.

He also noted that DM central banks' efforts to rollback post-crisis accommodation “may cause more volatility [and] higher rates in a way we don’t fully understand” because “we’ve never had QE" and therefore "we’ve never had reversal."

Exactly none of that is "new" or "news", as it were, which means you should just ignore those soundbites, especially considering that higher long end rates are a boon to NIM so you know, I'm not sure Jamie can be characterized as an impartial guy on this.

As far as the market implications, you're reminded that historically speaking, it's probably more like 4.5%-5% when equities start to get really nervous about 10Y yields, although the Taper Tantrum experience seems to suggest the "pain threshold" beyond which the stock-bond return correlation flips positive leading to diversification desperation might be considerably lower in the post-crisis world.

Again, it is not at all obvious why anyone cares about Dimon's comments and with spec positioning as stretched (bearish) as it is in bonds, it seems like the more likely scenario in the near-term is short covering in the event some kind of risk-off episode catalyzes a safe haven bid.

Whatever. One thing worth noting: if Jamie does end up making a successful run at the White House on the way to righting all of the societal wrongs he elaborated on in his annual letter, he'll inherent an unprecedented mess that, if the IMF is correct, will put America in worse fiscal shape than Italy by the time Trump's first term is over.

So who knows. Maybe we'll all be able to look back at this week's 4% on 10s pseudo-prediction and laugh one day when President Dimon is confronting 10Y yields at 15% thanks to by-then-former-President "King Of Debt's" "very good brain".

Oh, and Jamie had one more pearl of wisdom for everyone. To wit:

Someone asked me once, what's the odds of a recession? I said it's 100 percent. But the question is when.

One more time: why you people care about these headlines is anyone's guess.



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