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AI-driven bond supply lifts real yields to decade highs
U.S. authorities paid 5.22% at a 30-year auction on Thursday, the highest cost since 2001, as investors demand higher inflation-adjusted returns.
Reuters reports that market gauges of inflation-adjusted borrowing costs have jumped to their highest levels in more than a decade across major economies, driven by a surge in bond issuance from AI-related companies and continued government selling.
Real yields, the return investors demand above inflation, are cited as being near 18-year highs for U.S. 30-year inflation-linked debt at around 3%, while British and German 10-year real yields are around their highest in more than a decade. Investors and analysts point to heavier borrowing by AI “hyperscalers” at a time when governments are still spending aggressively, increasing demand for higher returns to absorb the larger supply of bonds.
The report highlights that the U.S. paid the highest borrowing cost on a 30-year bond at auction since 2001, at 5.22% on Thursday. It also notes that Alphabet, Amazon, and Meta have issued nearly $220 billion of bonds so far this year, more than double the $108 billion issued for all of 2025, according to LSEG data.
Reuters adds that with inflation expectations broadly steady amid geopolitical tension, the rise in real yields has helped push nominal yields higher globally. Analysts also attribute the move to reduced central bank support for bond markets, with central banks no longer buying bonds that previously helped suppress yields, and to market pricing for potential rate hikes, which can lift real borrowing costs.