Analysis-AI-driven surge in bond yields could be next risk for markets and growth

Real yields, or inflation-adjusted borrowing costs, have surged to their highest levels in over a decade across major economies, as artificial intelligence companies and governments increase bond sales, raising risks for stock markets and the global economy. U.S. 30-year real yields are near 18-year highs at around 3%, while British and German 10-year real yields are at their highest in more than a decade.

The rise in real yields has pushed up nominal yields worldwide, as investors demand higher returns to purchase the increased number of bonds entering the market.

AI hyperscalers, such as Alphabet, Amazon, and Meta, have issued nearly $220 billion of bonds so far in 2024, more than double the $108 billion issued in all of 2025, data from LSEG shows. The competition for capital is unprecedented, driven by AI build-out and government borrowing. U.S. government spending is projected to be around 6% of GDP, or $1.9 trillion, this year, while France and Britain's deficits are at 5% and 4%, respectively.

Central banks are no longer buying bonds, which has suppressed yields. Strong economic growth, particularly in the United States, is also contributing to the rise in real yields. Analysts warn that higher real yields could reduce the appeal of stocks, as investors seek better inflation-adjusted returns on bonds. However, major tech companies are still burning through their cash reserves, and this may lead them to turn to credit, making the rise in real rates more impactful.

Higher real yields could also slow growth by causing companies and households to cut consumption and investment.