Artificial intelligence investment is adding another layer of pressure to US borrowing costs, as technology companies raise more debt to finance infrastructure, and expectations of future productivity gains influence long-term interest rates.
ING, in its October 1 report, estimates that AI accounts for about 20% of the forces influencing long-dated rates, with productivity expectations representing the largest share of its estimated impact. The bank's analysis comes as US corporate bond issuance has crossed $1 trillion this year, led by technology, media and telecommunications companies.
Three channels of influence
In the October 1 note, ING's global markets research team identified three channels through which AI influences long-term interest rates: direct spending, corporate borrowing and productivity expectations. The bank estimated that productivity accounts for about 70% of AI's overall influence on long-dated rates, while corporate issuance represents 25% and direct spending accounts for the remaining 5%.
The productivity channel reflects expectations that AI could improve the productive capacity of capital and labour. ING said higher productivity could increase expected returns on investment, encourage additional capital spending and put upward pressure on real yields. The bank drew a comparison with the technology boom of the late 1990s and early 2000s, when the 10-year real yield reached about 4% and the nominal yield exceeded 6%. Currently, ING puts the 10-year real yield at 2.9% and the nominal yield at 5.2%.
However, ING stressed that AI is not the only factor influencing long-term borrowing costs. It considers inflation and fiscal deficits more important overall drivers of the rise in long-dated rates.
Corporate borrowing adds to financing pressure
The growth in corporate debt issuance provides a more direct measure of the financing required to support investment. US dollar corporate bond issuance reached $1.003 trillion year-to-date through September, exceeding the full-year 2025 total of $925 billion, according to an ING report published on October 6. September issuance totalled $112 billion, while net corporate supply reached $573 billion year-to-date.
Technology, media and telecommunications companies accounted for $381 billion, or about 38%, of dollar-denominated corporate issuance through September. Issuance in the sector rose 158% from the same period a year earlier. The figure does not represent AI-related borrowing alone, as ING's TMT category covers a broad range of businesses, and its data do not identify how much of the debt was raised specifically to finance AI investment.
Nevertheless, the increase comes as technology companies commit substantial sums to data centres, computing infrastructure and other AI-related investments. ING said technology companies have historically funded much of their investment through operating cash flows, but rising capital expenditure is weighing on corporate savings, and the bank expects issuance volumes to remain elevated as annual investment approaches $1 trillion.
Shift toward longer-dated supply
ING also highlighted a shift towards longer-dated corporate borrowing. The bank estimated that long-dated investment-grade corporate issuance was running $55 billion above the previous year, while Treasury issuance in the 10- to 30-year maturity range was unchanged at $340 billion. Treasury buybacks were about $20 billion higher year over year, reducing the amount of outstanding government debt held by investors. Combining the changes, ING calculated a $75 billion relative shift in long-dated supply pressure towards corporate bonds and away from Treasuries, equivalent to about 22% of the $340 billion in annual issuance across the comparable Treasury maturity range.
ING said the shift was not destabilising but was a factor to consider when assessing long-term yields. It also noted that investors had continued to absorb corporate issuance, with new-issue premiums for longer-dated and AI-related bonds remaining around 10 basis points.
Complicating the Fed's task
The financing boom comes as the Federal Reserve faces persistent inflation and elevated borrowing costs. US Treasury yields climbed to multi-decade highs this week, with the 10-year yield touching 5.36% and the 30-year yield rising above 5.7% before retreating from their peaks.
In an October 9 note, Apollo Global Management chief economist Torsten Slok argued that AI investment is relatively insensitive to interest rates. Tighter monetary policy could therefore weigh on housing and autos while AI-related capital spending continues, complicating the Federal Reserve's efforts to cool economic activity.
This article is for informational purposes only and does not constitute financial advice.
