Analysis-AI-driven surge in bond yields could be next risk for markets and growth

LONDON, Aug 14 (Reuters) - Market gauges of inflation-adjusted borrowing costs have shot to their highest in more than a decade across major economies as AI companies and governments ramp up bond sales, raising risks for stock markets and the world economy.

Real yields are the returns that a bond investor ‌demands above inflation and are an important indicator of true borrowing costs for governments and companies. They are typically determined by expectations about growth, interest rates and the ‌supply and demand of money.

U.S. 30-year real yields, as measured by inflation-linked bonds, are near 18-year highs at around 3%, while British and German 10-year real yields are trading at around their highest in more than a decade.

Investors ​and analysts say a surge in borrowing by AI "hyperscalers", at a time when governments are still spending heavily, has been a leading factor pushing up yields, as buyers demand higher returns to keep purchasing the flood of bonds hitting markets.

With inflation expectations broadly steady despite the Iran conflict, the rise in real yields has pushed up nominal yields around the world in recent months.

The U.S. on Thursday paid the highest borrowing cost on a 30-year bond at auction since 2001, at 5.22%.

The likes of Alphabet, Amazon and Meta have issued almost $220 billion of bonds so far this ‌year, already more than double the $108 billion for the whole of ⁠2025, LSEG data shows.

"There's a competition for capital which is relatively unprecedented in recent times," said Vivek Paul, UK chief investment strategist at the BlackRock Investment Institute.