JPMorgan CEO: Interest rates may rise sharply, inflation will make investors reluctant to hold long-term bonds.

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As U.S. Treasury yields rise to multi-year highs, JPMorgan CEO Jamie Dimon warns that the market is still underestimating the risk of “long-term high interest rates” and that the global bond market adjustment may be far from over.

Dimon believes that the fundamental change is the reshaping of the global capital landscape. The “excess savings” that once supported a low interest rate environment is shifting toward “savings shortage,” signaling the likely end of the era of cheap money. Combined with the AI investment boom, oil prices pushed up by geopolitical tensions, persistent fiscal deficits, and mounting debt pressures, medium- and long-term inflation expectations are continuously being pushed higher. Against this backdrop, the global economy may be entering a new stage of “higher-for-longer” interest rates, and persistent inflation pressures are clearly weakening investors’ willingness to hold long-term bonds.

Market pricing signals have begun to reflect this shift. This week, 30-year U.S. Treasury yields rose to their highest level since 2007, and 2-year U.S. yields hit a peak not seen since February 2025. Interest rate swap data shows traders assign about a 70% likelihood the Fed will raise rates by 25 basis points by December, and have nearly fully priced in the possibility of another hike by March next year. Before the Middle East conflict flared, markets had once expected rate cuts totaling more than 50 basis points within this year. This drastic reversal from “rate cut expectations” to “rate hike pricing” highlights that market concerns over inflation and fiscal risks are rapidly heating up.

A Shift in the Savings Pattern, Interest Rate Upside Risks Not to Be Ignored

Dimon stated bluntly, "Interest rates could go much higher than where they are today. We may have already moved from excess savings to a savings shortfall." He emphasized that believing interest rates will never rise is wrong; "Bond yields can rise. Companies like ours prepare for both rising and falling rates."

The pressure on long-term bonds is the result of multiple factors working together: rising oil prices may force central banks to increase rates, government spending in Japan, the UK, and the U.S. raises concerns; and the AI boom is supporting growth in the world’s largest economies. These factors combined push investors to demand higher compensation for holding long-term bonds.

Dimon explicitly expressed his concerns about U.S. government debt. He pointed out that U.S. government debt has reached $30 trillion, with an average interest rate of 3.5%. "Even today, they can’t refinance at less than that rate." He added that there is another $2 trillion in debt to be dealt with this year, but it is still unclear when the market will panic about this, or when inflation will make investors unwilling to hold long-duration bonds.

This means that as maturing debt is successively rolled over, the interest burden on U.S. finances risks increasing further, which in turn may strengthen market expectations for long-term interest rates to rise.

Credit Spreads Also Face Widening Pressure

Dimon’s warning isn’t limited to the Treasury market. He pointed out that the impact of rising rates will also transmit to the credit market: “Rates can easily go higher, and credit spreads can also widen further. At some point, a large number of borrowers will have to refinance at higher rates.”

For corporate bond investors, this means dual pressure: First, the rise in risk-free rates directly lowers the pricing benchmark for all bonds; second, the potential widening of credit spreads, reflecting the market’s re-pricing of default risks. Under the combined effects, outstanding bond prices are squeezed from both sides, and highly leveraged companies will face higher refinancing costs when their debts mature, causing credit risks to gradually accumulate.

Risk Disclosure and DisclaimerThe market carries risks, so investors need to exercise caution. This article does not constitute personal investment advice, nor does it take into account individual users’ special investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their particular circumstances. Investing accordingly is at your own risk. ```