As long-term Treasury yields reach multiyear highs, a deluge of AI-related bond issuance has been cited as a contributing factor.¹ The case is based on supply and demand: As more AI debt is issued, the overall supply of debt increases, and yields on all bonds must rise to attract sufficient demand. This effect is strongest if AI debt competes directly with Treasurys for investor dollars. This may be the case for some investors, since the spreads on the highest-rated AI issuers are so low. But since AI issuance accelerated in the fall of 2025, spreads on many hyperscaler corporate bonds have started to creep toward more typical investment-grade levels. As AI debt becomes less like Treasury debt, the direct-competition channel weakens […]