Treasury yields spike as inflation data fuels Fed rate hike fears
Making Money panelists Steve Chiavarone and Sarah Hunt discuss rising treasury yields, inflation worries, analyze market risks and shares top stock picks, including AMD and Airbnb.
JPMorgan Chase CEO Jamie Dimon warned that while the U.S. economy is being driven by both consumer spending and business investment, there are five economic threats that may challenge that growth.
Dimon's comments were included in JPMorgan's quarterly earnings release last week, which noted the nation's largest bank missed Wall Street analysts' profit expectations.
"The U.S. economy continued to be fueled by strong business investment and ongoing consumer spending," Dimon said.
"However, large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface," he added. "These forces may be manageable, but we remain prepared for a wide range of outcomes."
CONSUMER INFLATION ROSE FASTER THAN EXPECTED IN SEPTEMBER, CPI REPORT SAYS
JPMorgan Chase CEO Jamie Dimon said the economy is forging ahead but several threats are sitting under the surface. (Caroline Brehman/Bloomberg via Getty Images)
Dimon's concerns come as fresh economic data showing that inflation accelerated more than expected in September was released on Wednesday.
The Bureau of Labor Statistics released the September consumer price index (CPI), which showed headline CPI rose 3.7% year over year – above the 3.6% estimate of economists polled by LSEG. Core CPI, which excludes volatile food and energy prices, was up 2.6% from a year ago, which was also hotter than the expectations of economists who estimated a 2.5% rise.
Both core and headline CPI inflation are well above the Federal Reserve's 2% target rate, setting up a potential interest rate hike by policymakers before the end of the year. The central bank's next two monetary policy meetings are in late October and mid-December.
FEDERAL BUDGET DEFICIT HITS $2T AS NATIONAL DEBT COSTS SURGE
Stubborn inflation, driven in part by higher energy prices due to the Iran war, has presented a challenge for households. (Frederic J. BROWN / AFP via Getty Images)
Higher interest rates on longer-term U.S. Treasurys are caused in part by the Federal Reserve raising its benchmark federal funds rate, as occurred when policymakers met in September.
Other factors also play a significant role in driving interest rates higher, including larger fiscal deficits around the world as well as increased issuance of corporate debt as companies sell bonds to raise capital for the artificial intelligence (AI) buildout and other investments.
Investors seeking higher returns in exchange for purchasing bonds have contributed to the upward pressure on yields.
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Dimon's comments on large budget deficits follow the news that the U.S. federal government had a $2 trillion shortfall in its recently concluded fiscal year 2026.
The nonpartisan Congressional Budget Office (CBO) reported that the preliminary data showed a $1.993 trillion deficit in fiscal year 2026, which wrapped up at the end of September.
CBO reported that the main drivers of the budget deficit were increased spending on servicing the national debt, with net interest expenses rising by $115 billion, or 11%, from a year ago.
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The larger national debt and higher long-term interest rates drove up debt service costs, which were among the largest expenses in the federal budget.
