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On September 23, Pimco declared that, following an in-depth examination of nominal yields, term premiums, and swap spreads, there's a lack of compelling evidence to indicate that the debt issuance by AI companies, which has exceeded expectations, has led to a surge in U.S. Treasury yields. Lotfi Karoui, a strategist specializing in multi-asset credit, highlighted in a report that although the AI capital expenditure boom might elevate the equilibrium real interest rate via savings and investment avenues, the notion that AI debt issuance will directly crowd out U.S. Treasuries is not substantiated by data. Pimco noted that over the past year, there have been six unanticipated debt issuance deals. Around the announcement dates of these deals, existing bonds witnessed abnormal drops, suggesting that the market hadn't fully factored in the scale or timing of these issuances.
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