JPMorgan Chase & Co. head Jamie Dimon said last year'svolatility in U.S. Treasuries is a “warning shot” to investors andthat the next financial crisis could be exacerbated by a shortageof the securities.

The Oct. 15 gyration, when Treasury yields fluctuated by almost0.4 percentage point, was an “unprecedented move” that would haveserious consequences in a stressed environment, Dimon, the NewYork-based bank's chairman and chief executive officer, said in aletter Wednesday to shareholders. Treasuries are supposed to beamong the most stable securities.

Dimon, 59, cited the incident as he waded into a debate aboutwhether bank regulations implemented after the 2008 financialcrisis exacerbate price declines by limiting the ability of WallStreet banks to make markets. It's just a matter of time until somepolitical, economic or market event triggers another financialcrisis, he said, without predicting one is imminent.

The Treasuries move was “an event that is supposed to happenonly once in every 3 billion years or so,” Dimon wrote. A futurecrisis could be worsened because there “is a greatly reduced supplyof Treasuries to go around.”

New regulations have resulted in diminished liquidity acrossbond markets, which could result in higher volatility during acrisis, Dimon wrote.

“Inventories are lower — not because of one new rule but becauseof the multiple new rules that affect market-making, including farhigher capital and liquidity requirements and the pendingimplementation of the Volcker Rule,” Dimon wrote. Conceived byformer Fed Chairman Paul Volcker, the rule aims to let banks handleclient trades without making additional bets with their own moneyon the direction of asset prices.

While banks' ability to buffer clients and consumers during thenext crisis may be reduced, the industry is much stronger nowbecause of higher capital requirements, Dimon wrote.

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