Add as a preferred source on GoogleIMF Warns Debt and AI Borrowing Could Drive Disorderly Bond-Yield Spike
Rising public debt, inflation pressures and leveraged Treasury positions are increasing risks across sovereign bond markets, while AI companies compete with governments for investor capital.
The International Monetary Fund warned Tuesday that government bond yields could rise sharply and disorderly as inflation pressures, heavy public debt and artificial intelligence-related borrowing strain sovereign markets.
The warning came during the IMF-World Bank annual meetings in Bangkok, Thailand. Global public debt is near its highest level since World War II and is expected to exceed 100% of gross domestic product soon.
High debt loads and rollover risks leave bond markets more exposed to fiscal and inflation shocks. A sharp rise in yields could reduce asset values through higher discount rates and weaken government bonds used as collateral, with effects extending to AI-related assets.
AI companies are adding pressure by competing with governments for investor capital. Hyperscalers accounted for 10% of global investment-grade bond issuance, up from less than 1% in 2024. Tech giants, hyperscalers and AI labs have raised hundreds of billions of dollars in debt this year, with much of the AI-related borrowing extending over longer maturities.
The IMF identified rising AI-related borrowing as an additional source of strain on government bond markets.
Leverage in the U.S. Treasury market is another vulnerability. Hedge funds’ share of U.S. Treasurys rose to about 9% in 2025 from about 4% in 2022, largely through leveraged Treasury basis trades. The IMF said the leverage that remains could leave the market vulnerable to a disorderly unwinding of those positions.
Liquidity measures remain stable in the United States, Europe and the United Kingdom, and market functioning has remained orderly. Japan’s government bond market is an exception, with liquidity continuing to deteriorate as yield volatility increased after the end of yield-curve control.
The IMF urged debt managers to lengthen maturities. Replacing long-term borrowing with short-term debt on a large scale could increase rollover risks when governments must refinance their obligations.
Enna Lee
ReporterEnna Lee reports on investing and digital-asset markets for TokenPost. Send corrections or tips to info@tokenpost.com.