Real bond yields have climbed to their highest levels in years across major economies as technology companies and governments compete for funding. US. 30-year real yields are near 3%, their highest level in almost two decades, while 10-year real yields in Britain and Germany are also at more than decade highs. The U.S. Treasury on Thursday sold 30-year debt at a 5.22% yield, the highest borrowing cost for that maturity since 2001.
The rise comes as AI companies increase their borrowing to finance data centres and other infrastructure while governments continue to run large deficits. Alphabet, Amazon and Meta have issued almost $220 billion of bonds so far this year, more than double their combined issuance in all of 2025. The U.S. budget deficit is expected to reach about $1.9 trillion this year, adding further demand for investors’ capital.
AI debt is adding pressure to an already crowded bond market
The bond market is facing a supply problem at a time when the biggest borrowers are asking investors for increasingly large amounts of money. Goldman Sachs estimates AI-related debt issuance could approach $500 billion this year, while Morgan Stanley’s estimate is close to $570 billion.
The competition is already showing up in investor demand. Hyperscalers issued about $194 billion through July 7, but average order coverage fell sharply from almost five times in February to below two times by July. Amazon’s July bond sale attracted orders equal to 1.6 times the amount offered, compared with 3.4 times in March.
This is important because weaker demand can force companies to offer higher yields to get deals done. The effect is not limited to technology companies. As large borrowers absorb more of the available capital, smaller companies and governments can face a higher financing hurdle as well.
For AI companies, the timing is particularly important. Data centres require enormous upfront investment before they generate revenue, so a sustained rise in borrowing costs can change the economics of projects that looked attractive when money was cheaper. The question for investors is increasingly whether AI-related returns can keep pace with the cost of financing the infrastructure needed to produce them.
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Higher real yields are changing the benchmark for risk
The rise in real yields also gives investors a more attractive alternative to riskier assets. That creates pressure on companies whose market values depend heavily on profits expected years into the future. Higher real yields increase the rate used to value those future earnings, reducing their present value even if corporate profits remain strong.
The effect is already visible in the way markets are assessing long-term investment. AI companies can continue spending aggressively while their businesses generate strong cash flows, but projects at the margin face a tougher test. A new data centre, chip facility or power project has to generate enough returns to cover a more expensive funding environment.
Government borrowing adds another layer as the U.S. deficit is projected at around 6% of GDP this year, while France and Britain are also running large deficits. At the same time, central banks are no longer absorbing bonds at the scale seen during the years of ultra-low rates.
That leaves the bond market carrying more of the burden of financing global investment. If real yields continue rising, the impact may eventually move beyond financial markets and into corporate spending, infrastructure investment and household borrowing. For now, the economy remains resilient, but the cost of capital is becoming a much harder variable for the AI boom to ignore.
Meanwhile, global equity funds attracted $49.23 billion in net inflows during the week ending July 8, their strongest weekly performance in three weeks, as investor confidence improved on continued demand for artificial intelligence technologies and easing expectations of further U.S. interest rate hikes.
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