Not content with a previous warning investors should brace for U.S. yields of 4 percent, Jamie Dimon went one further at the weekend, suggesting 5 percent was a distinct possibility.

The JPMorgan Chase & Co. chief executive officer said Saturday people should be prepared to deal with the benchmark 10-year bond yield at 5 percent or higher.

“I think rates should be 4 percent today,” Dimon said Saturday at the Aspen Institute’s 25th Annual Summer Celebration Gala. “You better be prepared to deal with rates 5 percent or higher - it’s a higher probability than most people think.”

The 3 percent level is still providing stiff resistance for the 10-year Treasury yield this year. It briefly rose through the mark last week before falling back for the fourth time this year. That’s despite a U.S. jobless rate below 4 percent, economic growth above 4 percent, and a rare surge in late-cycle government borrowing.

Unease about the length of the economic cycle may be behind the stalled rise in yields. “The market is starting to look beyond the 2020 time-frame and pricing in some recession risk,” said Tom Garretson, U.S. fixed-income portfolio strategist at RBC Wealth Management.

Inflation Gauge
In addition, concerns about rising prices appear to be ebbing. In the U.S., the 5-year break-even rate, a gauge of inflation expectations, has fallen to just under 2 percent, down from this year’s high of almost 2.2 percent.

Still, Dimon remained positive on the outlook for financial markets.

The current bull market could “actually go for 2 or 3 more years” because the economy is still doing quite well and markets usually turn right before the economy, he said.

Cyber attacks are “probably the biggest risk” to the U.S. today, though banks are quite well protected, Dimon said.

“We’re very, very protected,” he said.

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