The borrowing binge is dragging real yields to heights not seen in over a decade
Real, inflation-adjusted borrowing costs have climbed to their highest in more than a decade across major economies, as artificial intelligence companies and governments flood bond markets with new debt and raise fresh risks for equity investors.
Real yields, the return a bond investor demands above inflation, track the true cost of borrowing, Reuters reported.
US 30-year real yields sit near 18-year highs at around 3 percent, while British and German 10-year real yields trade close to their highest in more than a decade.
A borrowing surge by AI "hyperscalers" has become a leading force behind the climb, as buyers demand higher returns to absorb the new issuance.
Alphabet, Amazon, and Meta have together issued almost US$220bn of bonds so far this year, already more than double the US$108bn they raised in all of 2025, LSEG data showed cited by Reuters.
Vivek Paul, UK chief investment strategist at the BlackRock Investment Institute, said the "competition for capital" is "relatively unprecedented in recent times."
The AI build-out keeps "ramping ever up," he said, and that scarcity is showing up in bond yields.
Governments are adding to the supply.
The US budget deficit is set to run near 6 percent of GDP, or US$1.9tn, this year, with France at 5 percent and Britain at 4 percent, Reuters reported.
Higher real yields should, in theory, dull the appeal of stocks, since investors can secure better inflation-adjusted returns from bonds.
Equities have so far brushed it aside, with JPMorgan lifting its S&P 500 earnings forecasts and European blue-chip profits on track for their fastest growth since late 2022, according to LSEG I/B/E/S data.
Not everyone expects the calm to hold.
Matt King, founder of Satori Insights, warned that big technology firms are burning through cash and will lean more heavily on credit.
"We expect real yields to continue rising until they choke off the borrowing which has been driving them - and the rotation into risk which has been fuelling the equity rally," he wrote in a note.
Ashok Bhatia, chief investment officer at Neuberger, said US real yields remained below the 3 to 4 percent range where he expects them to bite into growth.
"But today's level is a warning sign that growth, while currently solid at 1.5 percent to 2 percent, could start to be threatened," he said.
The borrowing reflects a build-out now surfacing in output data.
Britain's economy grew 0.4 percent in the second quarter, and the information and communications sector delivered almost half of that expansion, more than any other industry, the Office for National Statistics said.
Spending on plant and machinery rose to £22.1bn (US$29.8bn) in the quarter, close to a 2022 record, with the ONS tying the strength to ICT equipment, particularly computer hardware.
Canada is moving to track the same shift.
Statistics Canada has launched TechStat, an initiative announced under Budget 2025 to measure how AI and emerging technologies are reshaping the economy and labour market.
Adoption at home is already climbing: 19.2 percent of Canadian firms used AI to produce goods or deliver services in 2026, up seven percentage points from a year earlier.
Its first findings, drawn from Labour Force Survey supplements on AI use at work, were published in the summer of 2026.
