Analysis: AI-related debt issuance has limited impact on U.S. Treasury yields; 10-year yield may fall to 4.25% by end of 2027

PANews reported on September 29 that Capital Economics' analysis pointed out that the sell-off in U.S. Treasuries mainly stems from changes in market expectations for near-term interest rates. The 10-year Treasury yield is now close to its June 2007 high, and economist James Reilly noted that this move reflects rising oil prices and a strong U.S. economy rather than being driven by AI-related debt issuance or fiscal concerns.

Reilly expects that, as the Fed tightens less than investors currently anticipate, the 10-year Treasury yield will "fall sharply to 4.25%" by the end of 2027. He believes that although AI-related debt issuance will continue to put upward pressure on yields, its impact is not as large as media reports suggest and will be offset by changes in monetary policy expectations. As for fiscal concerns, he added that there has been no substantive fiscal news recently sufficient to trigger a sharp surge in yields.