JPMorgan CEO Dimon Issues Another Warning on the Bond Market: Corporate Borrowers Will Start to Face Pressure

According to news from Zhitong Finance APP, as the global bond market comes under renewed pressure, JPMorgan CEO Jamie Dimon warned during a break at an event in London on Tuesday (October 6) that the global scramble for capital may soon begin to squeeze corporate borrowers. Dimon noted that investors will continue to demand higher returns, and this pressure will eventually transmit to corporate bonds and credit spreads.

Dimon has previously warned of risks in the bond market several times: on April 28th, he predicted at the Norwegian Sovereign Wealth Fund conference that “some kind of bond crisis” could occur; as early as 2025, in an interview, he also cautioned that volatility in the bond market would hurt borrowers, including small businesses, and admitted he could not judge whether trouble would arrive in six months or six years. This time, he highlighted the next group that may come under pressure.

Dimon's Latest Warning: Corporate Borrowers Will Begin to Feel the Squeeze

At a JPMorgan event in London on October 6th, Dimon stated during a break that the global competition for capital may soon begin to squeeze corporate borrowers. He pointed out that investors will keep demanding higher returns, and at some point, this pressure will transmit to corporate bonds and credit spreads.

Credit spread refers to the extra portion by which the corporate borrowing rate exceeds the government borrowing rate. When the spread widens, the cost for companies to refinance old loans or take on new ones rises.

Dimon's advice is to act early. He said, “The best way to deal with these things is to handle them before they turn into a crisis.” He added that if it does become a crisis, the problem will still be dealt with, but the process will be much more painful.

Bond Market Pressure is Evident: US Treasuries, Junk Bonds, and Leveraged Loans Face Tightening

Dimon's comments come as the global bond market faces a wave of sell-offs. This sell-off started after war broke out in Iran, pushing inflation higher. The benchmark 30-year US Treasury yield recently climbed to its highest level since 2007. The robust US economy and the AI boom driving demand for capital have further intensified this pressure.

Higher-risk debt has already shown signs of strain. According to LSEG data compiled by Yardeni Research, the cost of insuring against defaults of US junk bonds in the credit default swap (CDS) market has increased significantly.

JPMorgan strategists have quantified the problem with data. The value of leveraged loans trading below 60 cents on the dollar has reached $65 billion, up from $40 billion a year ago, the most since March 2020.

The broader pool of distressed loans is even larger. Loans priced at or below 80 cents on the dollar total $139.8 billion, nearly 90% more than twelve months ago, and only $4 billion short of the peak in May 2020.

The technology sector is the weak link. This industry accounts for 39% of the total distressed loans, amounting to $54.4 billion. There are loans from 141 issuers trading below 80 cents on the dollar, 35 more than a year ago.

The firm expects more companies to default. Its strategists anticipate the default rate for high-yield bonds will rise from the expected 2.25% this year to 2.75% in 2027. The default rate for leveraged loans is also projected to reach 4.50% by 2027.

CCC-rated bonds—the lowest tier of junk bonds—now yield 15.58%, the highest since November 2022.

Why is Money More Expensive? Three Main Drivers and Countermeasures

Dimon's explanation begins with supply and demand. In May this year, he noted that global savings had shifted from surplus to shortage. He warned that interest rates could be much higher than the levels seen at that time. Back then, yields on 30-year US Treasuries had already hit the highest level since 2007.

He highlighted three main factors: high oil prices; concerns over government spending in Japan, the UK, and the US; and AI-driven growth. Particularly, America's growing debt burden is amplifying this pressure. On April 28th, when Dimon spoke in Norway, US federal debt stood at $39 trillion; data released by the US Treasury in August showed the figure had surpassed $40 trillion for the first time.

He also cited the 2022 UK bond market crisis: yields surged within days, forcing the Bank of England to intervene. His key point: events like these can escalate rapidly.

Inflation adds another layer of pressure. In his April 6th letter to shareholders, Dimon referred to inflation as the “skunk at the party.” He worries that prices will keep rising into 2026 rather than retreat, and the war in Iran has pushed up energy costs.

For companies, Dimon's test is simple. Whether leveraged or not, any company needing to refinance or borrow must ask if it is prepared for higher credit spreads. This applies not only to companies with tight balance sheets but also to those with strong balance sheets.

So far, the damage remains relatively contained. After the Fed's rate hike in September, Dimon said borrowing costs might keep rising. However, the relatively robust job market suggests these costs have not yet translated into broader economic stress.

He does not believe this calm will last forever. It has been a long time since the last credit crisis. As Dimon said in April, when the next wave of credit trouble comes, “it’ll be worse than people think.”

Given the scale of current risk exposures, this warning carries more weight. The size of the private credit market alone amounts to about $1.7 trillion, and that number continues to grow.