The 10-year U.S. Treasury yield touched 5.36% this week — its highest since 2002 — and the sell-off is not confined to Washington. France, Italy and the United Kingdom are all watching their own borrowing costs climb at the same time, and the IMF is saying it is a warning.
Benchmark U.S. government bond yields climbed to fresh multi-decade highs, with the 10-year hitting as high as 5.36% and the 30-year reaching 5.73%. The U.K. 30-year gilt yield rose to its highest level since 1998, and France and Italy's benchmarks rose sharply. A $39 billion Treasury auction of 10-year bonds drew strong demand and pulled yields back slightly to about 5.27%, but the auction's 5.3% clearing rate was the highest of any U.S. 10-year sale since November 2000.
The pressure is not purely macroeconomic. International Monetary Fund chief Kristalina Georgieva warned that governments urgently need to rein in unprecedented debt levels, and said the ever-expanding AI boom will keep global bond yields under pressure. She noted that policymakers "had a relatively easy ride over the last 17 years," when interest rates stayed below GDP growth; "higher interest rates now put an end to that."
The private AI buildout is now a public debt story. Multiple reports this week said Elon Musk's SpaceX is seeking to raise $40 billion in cash, in part to buy AI chips from Nvidia — money that would join hundreds of billions already raised by AI-linked companies through bond sales to build data centers and buy equipment. Apollo's economic strategist noted that hyperscalers have raised $48 billion in European-currency bonds this year, more than triple the entire amount of 2025. Some economists believe that wave of private borrowing is adding measurable pressure to government yields.
The equities response has been mixed. The bond rout sent stocks tumbling early in the day, after the S&P 500 and Nasdaq had notched record highs the day before; both ended the session down about 0.2%, the Dow fell 341 points, and European markets took a harder hit, with Italy's FTSE MIB sliding 2.5%. Brent crude hovered above $100 a barrel. The question the markets are now answering is whether the AI capex wave is a durable growth story or a debt-driven cost inflation that sovereigns cannot outborrow.