Global Bond Yields Hit 20-Year Highs Amid AI Debt Surge

Global government bond yields reached their highest levels in nearly two decades on September 25, 2026, with the average sovereign debt yield hitting 4%. In the United States, the 10-year Treasury yield climbed to nearly 5.18%, briefly touching 5.230%, the highest since June 2007. This sell-off extended to Japanese government bonds, UK gilts, and German bunds, pushing average U.S. mortgage rates to a two-year high of 7.45%.

Kevin Warsh, Chair of the Federal Reserve, attributed the surge to increased competition for capital from hyperscalers. Large technology firms are issuing massive amounts of long-dated corporate debt to fund AI infrastructure, which competes directly with U.S. Treasuries for a finite pool of long-term investors. Corporate bond issuance of 10 years or longer has reached $752 billion this year, and AI-related capital expenditures are expected to exceed $1 trillion next year.

Other drivers include stubborn inflation and mounting fiscal deficits, with the Congressional Budget Office estimating an annual U.S. shortfall of $2.1 trillion. Treasury Secretary Scott Bessent attempted to stabilize the market through expanded buybacks of long-dated government debt, but the intervention failed to stop the climb. The Federal Reserve is now weighing an October interest rate hike, with futures markets pricing the probability at 71%. Meanwhile, the Reserve Bank of Australia is expected to raise rates to a 15-year high of 4.6% on Tuesday.