Bonds & Rates
Home›Bonds & Rates›Economy›Bond yields surge as oil tensions and AI borrowing lif…
Bond yields surge as oil tensions and AI borrowing lift global rates
Debt issuance by major tech firms for AI data centers has accelerated, adding competition for bond financing and pushing up government borrowing costs.
BBC Business economics editor Faisal Islam says global bond markets are seeing a more fundamental shift, with countries needing to pay more to borrow cash as interest rates move toward multi-decade highs.
The outlet links the rise in borrowing costs to the closure of the Strait of Hormuz and renewed US-Iran hostilities, which it says have pushed up inflation and raised expectations for higher interest rates, rather than tensions easing ahead of November midterm elections.
Islam adds that rising global demand for borrowing extends beyond governments, pointing to big tech firms using the bond market to fund AI data centers. He cites more than $219 billion of debt issued this year by US hyperscalers such as Google, Amazon, and Meta, with nearly a third issued in currencies other than the dollar, including sterling.
BBC Business also notes that some expect tech companies to raise $400 to $500 billion from bond markets this year, and it highlights that Japan has the most acute pressure, with its central bank rate having moved off zero and government bond yields reaching 30-year highs, while a weaker yen complicates conditions for investors.