What the AI investment boom means for bonds | Market Week in Review

Description:
In this Market Week in Review (MWIR), Russell Investments’ Co-Head of Global Fixed Income Riti Samanta examines what the AI investment boom means for bond markets, including its potential impact on real interest rates, U.S. Treasury yields and corporate credit.
 
Key takeaways:

- Treasury yields rise amid shifting views on policy, inflation and growth

- AI investment may lift real rates, but Treasury crowding-out evidence remains limited

- Strong fundamentals and demand support rising AI-related credit issuance
 

Questions answered:
What does the AI investment boom mean for bond markets?
AI investment is increasing financing needs across the economy and may contribute to higher real interest rates. It is also generating significant issuance across investment-grade, high-yield and securitized credit markets.
 
Is AI investment pushing U.S. Treasury yields higher?
AI investment may be contributing to higher real rates through increased demand for labor, energy, equipment, construction and capital. However, there is currently limited evidence that AI-related corporate borrowing is directly crowding out demand for U.S. Treasuries.
 
Why haven’t credit spreads widened despite higher issuance?
Much of the AI-related issuance has come from large, highly rated technology companies with strong profitability, interest coverage and balance sheets. Robust investor demand for investment-grade credit has also helped absorb the additional supply.
 
How is the AI buildout being financed beyond corporate bonds?
Data centers and other AI infrastructure are increasingly tapping high-yield and securitized markets, including asset-backed securities and commercial mortgage-backed securities. These markets could play a growing role in financing the broader AI buildout.
 
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Date of First use: September, 2026