AI bond borrowing surge pushes real yields to decade highs

Inflation-adjusted bond yields across major economies have hit their highest in over a decade, driven by a surge in borrowing by AI companies and governments, analysts say. U.S. 30-year real yields are near 18-year highs around 3%, while British and German 10-year real yields trade at their highest in more than ten years. The Hindu Business Line reports that Alphabet, Amazon and Meta have issued almost $220 billion in bonds so far this year, more than double the $108 billion for the whole of 2025, according to LSEG data.

The rise in real yields poses risks for stock markets and economic growth. Higher real yields reduce the relative appeal of equities, as bonds offer better inflation-adjusted returns and future cash flows become less attractive. Livemint notes that technology stocks, particularly those tied to AI spending, are sensitive to Treasury yields because their high valuations depend on future profit estimates. The S&P 500 has hit record highs despite the yield surge, but analysts warn that continued increases could choke off borrowing and slow the economy.

Markets are pricing in at least one interest rate hike by the end of the year in the U.S., and the yield on 30-year U.S. Treasury bonds is near its highest since 2007. Vivek Paul of BlackRock Investment Institute told The Hindu Business Line that competition for capital is relatively unprecedented. Ashok Bhatia of Neuberger said U.S. real yields remain below the 3%-4% level where they would impact growth, but warned the current level is a warning sign.