A surge in productivity driven by massive investments in artificial intelligence could lead to a significant rise in long-term US Treasury yields. According to an analysis by Barclays Capital, the yield on the 30-year US bond could reach 6%, a level last seen in June 2000.
A Structural Shift vs. Cyclical Trends
Anshul Pradhan, head of US interest rate research at Barclays Capital, notes that the bond market has yet to fully price in the risk of a sustained boost in productivity. While many investors currently view the rise in the neutral interest rate as a primarily cyclical phenomenon, Barclays suggests it may represent a permanent, structural shift in the economy.
If the economy demonstrates higher and more stable productivity, the Federal Reserve may be required to maintain interest rates at elevated levels for a prolonged period. Consequently, markets would need to upwardly revise their estimates for where rates will eventually stabilize in the long run.
The AI Investment Boom
A decisive factor in this evolution is the capital expenditure by American technology groups on AI infrastructure. The report estimates that spending for the current year will nearly match the total amount invested in the sector over the previous three years combined.
Provided other economic factors remain unchanged, Barclays estimates that aligning long-term forecasts with short-term realities could push the fair value of the 30-year yield to 6%, fundamentally altering the landscape for global borrowing costs.
