JPMorgan CEO Jamie Dimon sharpens warning about a corporate credit squeeze: 'The market will ask for more'

JPMorgan Chase ( JPM ) CEO Jamie Dimon sharpened his warning about the risks of a global bond sell-off on Tuesday, saying the world's massive competition for capital could begin squeezing corporate borrowers.

Dimon warned that the combination of rising government borrowing costs and spending on the AI boom could spill into corporate credit markets, pushing up the costs for companies to refinance or raise new debt.

"There will be a point where the market will ask for more and more and more, and yeah, at one point that'll feed into corporate debt, corporate credit spreads, and things like that, which is how it normally happens," Dimon said in a Bloomberg interview on the sidelines of a JPMorgan event in London.

"The best thing to do with any of these things is deal with it before it becomes a crisis. If it becomes a crisis, we will deal with it. It just will be in a much less pleasant way," he added.

The warning comes as a global rout in bonds has pushed longer-term borrowing costs sharply higher in recent weeks, with the benchmark US 10-year Treasury yield recently surpassing heights not seen since 2002.

That sell-off follows the start of the war in Iran, which has driven inflation materially higher . The US economy's strength, amid those price pressures, along with the AI boom's enormous new demand for capital, has exacerbated the dynamic.

Credit markets have already begun to show signs of stress as interest rates have moved higher. In recent weeks, the spread for insuring US junk bonds has widened significantly in the credit default swap market, according to LSEG data compiled by Yardeni Research.

Last week, JPMorgan strategists flagged leveraged loans in deeply distressed territory or those trading below 60 cents on the dollar, rose to $65 billion from a year ago to their highest level since March 2020.

Dimon has been delivering versions of this argument for months. In JPMorgan's April shareholder letter, he warned that the combination of spending on AI, defense, and infrastructure, along with large government deficits, should keep upward pressure on borrowing costs.

Weeks ago, he told Yahoo Finance , shortly after the Federal Reserve's September rate hike, that while he believed borrowing costs could continue to rise, the labor market's relative strength signaled that those costs hadn't yet translated into broader economic stress.

On Tuesday, Dimon focused on how those risks could play out for companies.