JPMorgan Chase CEO Jamie Dimon is bracing for a disruption in the near $300M U.S. Treasury market

Dimon's comments come as bond yields spike and market volatility rises. The rising yields have suggested investors are pulling back from popular trades

Amid heightened market volatility and the looming threat of a U.S. Treasury market disruption, JPMorgan Chase & Co (NYSE:JPM) CEO Jamie Dimon has urged the Federal Reserve to step in and prevent a crisis, similar to its actions during the early stages of the COVID-19 pandemic.

During a Friday earnings call, Dimon expressed his views on the potential for trouble in the vast, nearly $30 trillion Treasury market, which could arise from current regulations hindering banks' ability to provide liquidity when needed.

"There will be a kerfuffle in the Treasury markets because of all the rules and regulations," he said, adding that the Fed will only intervene "when they start to panic a little bit."

His comments come as bond yields have soared and market turbulence has increased. The surging yields suggest that investors are pulling back from trades that exploited price discrepancies between Treasury futures and underlying bonds, further pressuring a market already strained by trade tensions in the U.S.-China trade war.

Dimon noted that post-2020 regulations have limited banks' participation as buyers when liquidity dries up, as seen in 2020 when the Fed had to launch a multi-trillion-dollar bond-buying program to keep the market functioning.

He is advocating for reforms that would grant banks greater leeway to act as intermediaries. One proposal under consideration is to exclude Treasuries from leverage ratio calculations, enabling institutions to acquire more government debt without affecting their capital ratios.

"If they don't [change the rules], the Fed will have to intermediate, which I think is just a bad policy idea," Dimon stated.

The Treasury market plays a crucial role in global finance, influencing various aspects such as mortgage rates and corporate bond yields. Dimon cautioned that if the system seizes up again, the implications will be far-reaching for the broader economy.

A Treasury market disruption that necessitates Fed intervention could also lead some investors to seek refuge in bitcoin (BTC), which is often perceived as a hedge against monetary uncertainty. This scenario unfolded in 2020 when bitcoin's price soared in response to the Fed's large-scale stimulus measures. However, other factors, including bitcoin's halving in 2020, may have also contributed to the cryptocurrency's price surge.output: JPMorgan Chase & Co (NYSE:JPM) CEO Jamie Dimon is bracing for a disruption in the nearly $30 trillion U.S. Treasury market that could force the Federal Reserve to step in, just as it did during the early days of the COVID-19 pandemic.

Dimon, known for his blunt pronouncements on the financial system, said on Friday that current regulations could keep banks from stepping in as buyers when liquidity dries up in the critical market.

"There will be a kerfuffle in the Treasury markets because of all the rules and regulations," Dimon said during a call with reporters to discuss the bank's second-quarter earnings.

His comments come as bond yields have spiked and market volatility has risen in recent months. The rising yields have suggested that investors are pulling back from popular trades that exploit gaps between Treasury prices and futures, adding stress to a market already rattled by trade tensions under the escalating U.S.-China trade war.

"If they don't change the rules, the Fed will have to intermediate, which I think is just a bad policy idea," Dimon added.

The Treasury market plays a central role in global finance, setting the tone for everything from mortgage rates to corporate bond yields. Dimon warned that if the system locks up again, the consequences could ripple across the economy.

"It's not a good idea to have the Fed be the only intermediary in the biggest, most important market in the world to shut down," he said.

The Fed stepped into the market in a big way in 2020 to keep it functioning after the coronavirus pandemic triggered massive outflows from money market funds, part of the broader credit markets freeze. The central bank's multi-trillion dollar bond-buying program was a key part of the urgent rescue package deployed by the Fed to keep the financial system afloat.

Dimon said current regulations, enacted in the wake of the 2008 financial crisis, are preventing banks from playing the same role as intermediaries.

"The point is that if you don't have private-sector activity, you'll have public-sector activity, which I think is a bad idea," he said.

One idea under discussion is exempting Treasuries from leverage ratio calculations, which could allow institutions to buy more government debt without hitting capital buffers.

"We're happy to help and participate, but we can't be put in a box where we're not allowed to do it," Dimon said.