Morning Briefing: Drei Gründe, warum die Märkte Schulden weniger tolerieren – und Anleihen unter Druck geraten

Good morning, readers. Markets have put high-deficit state bonds and AI-heavy tech stocks under pressure on Tuesday. Thirty-year government bond yields rose to decade-high levels, with the US at 5.33 percent—the highest since 2007. Germany's 30-year Bund reached a record high at 3.78 percent, similar to France, Britain, and Japan.

Meanwhile, major tech companies' shares fell, with the US tech index Nasdaq 100 closing 1.7 percent lower. Three reasons fuel this trend: increasing sovereign debt, rising inflation, and competition with large tech companies' corporate bonds.

Investors are growing increasingly skeptical about the world's sovereign debt, especially that of the US government, leading to greater fiscal discipline demands. Inflation concerns have resurfaced, pushing investors toward expecting rising interest rates rather than decreasing ones. This applies to heavily indebted states and, consequently, to struggling AI stocks, which also have been highly leveraged for rapid growth.

Corporate bonds are increasingly competing with government bonds. Tech giants like Amazon, Google, Meta, and Microsoft have recently raised several hundred billion dollars to finance data centers, positioning themselves as solid debtors among the same investors who view governments as such. Now, asset managers like Nigel Green, CEO of deVere, emphasize that the US government, but likely German policymakers as well, must balance interest costs while containing inflation.

Public sector executives, such as bank CEOs, have already received pay raises, with median wage increases of 5.3 percent in the banking sector and 4.1 percent for public companies, reflecting the sector's resilience to inflation. On average, Sparkassen earn 439,000 euros in total compensation, more than double that of other municipal companies, according to a ZU Friedrichshafen study.