IMF cites AI slowdown, spiking yields as looming global market risks

The International Monetary Fund has issued a warning about potential global financial market risks stemming from an AI-driven selloff, surging government bond yields, and potential cyberattacks. In its latest Global Financial Stability Report, the fund cautioned that these near-term catalysts could trigger a correction in asset prices and potentially lead to systemic instability if amplified by underlying vulnerabilities.

Although AI investments have offset economic challenges from the Middle East conflict and policy uncertainty, the IMF noted that AI's economic potential may be less significant than anticipated, and growing leverage in the AI sector could worsen any shock. The group urged policymakers to manage leverage use, including derivatives and margin loans, and to ensure a sustainable path for public debt.

Additionally, the IMF highlighted the growing difficulty in defending against cyberattacks, with over 70% of cases in 2026 involving software providers patching vulnerabilities with little time to spare. Historically high sovereign debt levels and unresolved fiscal deficits in major economies are further exacerbating bond market risks, which the IMF warned could be driven even higher by increased energy prices.

Despite robust capital cushions in banks, the IMF cautioned of pockets of weakness and called for enhanced cybersecurity measures, including stricter oversight of third-party technology vendors.