JPMorgan CEO Jamie Dimon called Treasurys a poor investment, saying he wouldn't touch them with a '10-foot pole'
- JPMorgan's Jamie Dimon said he wouldn't touch US Treasurys with a "10-foot pole" because they're a poor investment right now, CNBC reported.
- The yield on the 10-year US Treasury note was last at around only 0.9%, despite having doubled in around four months, as interest rates remain near record lows and investors prefer equities right now.
- Speaking at a virtual conference, Dimon said there may be a bubble in some parts of the stock market, but not all of it.
- He also expressed support for a second US stimulus package.
JPMorgan CEO Jamie Dimon called US Treasurys a poor investment right now, given how little they offer in the way of returns right now, compared to other assets, CNBC reported Tuesday.
"I would not be a buyer of Treasurys," Dimon said at the Goldman Sachs 2020 US Financial Services Virtual Conference. "I think Treasurys, at these rates, I wouldn't touch them with a 10-foot pole."
The stock market continues to move higher, driven by positive news on coronavirus vaccines which, in turn is encouraging investors to move out of safe-haven assets, such as Treasurys and gold, and into riskier assets that tend to gain from economic expansion.
Also, the growing chances of a US stimulus bill is supporting the equity market, but this offers little in the way of a catalyst for another bond market rally, as US interest rates are already near zero and the central bank has limited room to loosen monetary policy much further.
The yield on the 10-year US Treasury note, which moves inversely to its price, stood at a meager 0.9% on Wednesday. It has more than doubled since August, having trebled since it hit all-time lows in mid-March during the worst of the crash in the financial markets. But this is well below the roughly 1.6% dividend yield of the S&P 500 index, for example.
JPMorgan still has to continue to purchase US Treasurys, since it heads up a lending business that manages over $3 trillion in assets to earn a spread, something Dimon noted at the Goldman conference, CNBC said.
Yields on riskier fixed-income assets, such as Treasurys, have fallen sharply this year because of unprecedented fiscal policies to prop up the economy, including near-zero interest rates. They've also been a major drag on bank profitability this year.
Dimon's comments on Treasurys were made in response to Goldman analyst Richard Ramsden who asked him about whether markets were fairly priced. He said that if a vaccine-led recovery next year pans out, then today's "bond spreads and most equity prices would be justified."
″There may be a bubble in small parts of the stock market, not all of it," Dimon said.
He also expressed support for a second fiscal stimulus package, saying it "should focus on those who need the help: the long-term unemployed, some of the new unemployed."