Bond yields are surging across the rich world — and the old explanations no longer suffice

Government bond yields across advanced economies have climbed to around 4% on average, the highest in more than 15 years and 2.5 percentage points above where they stood just before the COVID-19 pandemic. In the United States, the 30-year Treasury recently touched a level last seen 24 years ago. In France, ten-year yields hover just below a record of the same vintage. The scale of the move has unnerved policymakers and investors alike, raising the question of whether this is a slow grind toward fiscal discomfort or the early phase of something more dangerous.

Three shocks, not one

Alex Domash, an economics correspondent for The Economist, identifies three distinct forces driving the global bond sell-off simultaneously. The first is the AI investment boom. Business investment in the United States grew at an annualized rate of about 9% last quarter — remarkably strong given how high interest rates are. Five big hyperscalers are expected to invest roughly $800 billion in data centers this year alone, and estimates suggest worldwide investment in data centers could exceed $5 trillion by 2030. The European Central Bank recently estimated that more than 10% of investment by firms in the euro area is now related to artificial intelligence. Early in the boom, tech companies funded most of