---
title: "Guotai Junan Securities: AI capital expenditure crowds out sovereign debt, and the rise in long-term U.S. Treasury yields may force the Federal Reserve to ease"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/296429644.md"
description: "Guotai Junan Securities research report points out that the rise in long-term U.S. Treasury yields is mainly influenced by the crowding-out effect of AI capital expenditures. Tech giants have shifted from cash creators to long-term capital demanders, competing with sovereign debt for capital, leading to a decrease in market absorption capacity. Secondary factors include the discount on the Federal Reserve's credibility and inflation concerns. Looking ahead, the expansion of AI financing and the deterioration of global capital supply and demand may force the Federal Reserve to ease, which is favorable for the rise of gold"
datetime: "2026-08-20T03:27:03.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/296429644.md)
  - [en](https://longbridge.com/en/news/296429644.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/296429644.md)
---

# Guotai Junan Securities: AI capital expenditure crowds out sovereign debt, and the rise in long-term U.S. Treasury yields may force the Federal Reserve to ease

According to the Zhitong Finance APP, Guojin Securities released a research report stating that long-term U.S. Treasury yields have recently risen sharply, with both the 30-year and 10-year yields reaching multi-year highs. The core contradiction in this round of increases lies in the crowding-out effect of AI capital expenditures on long-term capital—technology giants are shifting from cash creators to long-term capital demanders, competing with sovereign debt for capital, leading to a significant decline in market absorption capacity. The secondary contradiction arises from the discount on the Federal Reserve's credibility and long-term inflation concerns triggered by high oil prices. Looking ahead, the continued expansion of AI financing demand, the deterioration of global long-term capital supply and demand, and negative feedback from Japanese asset allocation may force the Federal Reserve to ease and further drive up gold prices.

## The main points of Guojin Securities are as follows:

This week, long-term U.S. Treasuries have once again become the focus of the global market. On August 18, the yield on the 30-year U.S. Treasury bond briefly rose to over 5.32%, reaching a new high since 2007, while the 10-year yield also broke through 4.7%. We believe that the current rise in long-term rates can be summarized as: one main contradiction, two secondary contradictions, and one gray rhino.

**The main contradiction is that the enormous external financing demand from technology companies has raised real interest rates, crowding out sovereign debt.**

For the past decade, a significant characteristic of large U.S. technology companies has been their extremely abundant cash flow; they are among the largest cash creators in the entire capital market. However, AI Capex is now changing this attribute. The market currently widely expects that the capital expenditures of the five largest hyperscale data center operators will reach $750 billion to $800 billion by 2026, further climbing to $1.0 trillion to $1.1 trillion in 2027.

PIMCO previously estimated that the Capex for 2026-2027 would be equivalent to about 94% of the operating cash flow of the five hyperscalers, and with recent investment plans continuing to be revised upward, this ratio may now be close to 95%-100%. The bond issuance scale of the five companies in 2026 is approximately $250 billion, which is about one-third of their Capex; bond issuance in 2027 may further rise to $400 billion, accounting for about 35% of the Capex scale.

This means that technology giants are shifting from being cash flow creators, stock repurchasers, and financial asset buyers to long-term capital demanders. However, at the same time, the U.S. government's fiscal financing demand has not decreased, even as it has shifted to a short-term financing strategy. When the best credit-quality private enterprises globally begin to compete with the largest sovereign debt issuer for long-term capital, it will inevitably lead to a crowding-out effect.

![Image](https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/8db4fc402c17a43fa600e8d423f5deab.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

The Dallas Federal Reserve has estimated that if AI-related investment-grade corporate bond issuance reaches $300 billion this year, it could create approximately $360 billion in 10-year equivalent duration supply, which is about one-eighth of the U.S. Treasury duration supply.

On August 7, the day Alphabet announced its $25 billion bond issuance plan, U.S. Treasury yields rose across the board by 3-4 basis points, with the 10-year yield rising to around 4.65% and the 30-year yield climbing to 5.21% On the same day, the G-spread of Alphabet's previously issued 5.65% bonds maturing in 2056 widened from about 95bp the day before to 101bp, confirming the existence of the long-duration asset crowding-out effect.

The market's capacity to absorb AI bonds is marginally declining. Among the 91 ultra-large-scale computing enterprise bonds issued so far in 2026, 78 had yields at the end of July that were higher than their issuance levels. From the subscription situation, the subscription coverage ratio for new hyperscaler bonds has dropped from nearly 5 times in February to less than 2 times in July, and the new issuance premium (concession) has expanded from 2-3bp to around 12bp. Amazon's dollar bonds issued in March had a subscription of about 3.4 times, while those issued in July only had about 1.6 times. The CDS and secondary market credit spreads for tech companies have also started to widen again since June.

![图片](https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/6f85ff58eb48464b17ad0094bb827281.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

![图片](https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/1c8d33ef14ed72d33fcf9395a3c05f1b.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

![图片](https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/45a6d6a9255afdbf25d0e658a9426164.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

**A secondary contradiction is the declining predictability of the Federal Reserve's reaction function, as long-term rates begin to factor in a "credibility discount."**

Although the Federal Reserve's FOMC meeting in July maintained the status quo, Warsh's continued weakening of forward guidance has raised market concerns about the predictability of future monetary policy. Consequently, post-meeting U.S. Treasury rates saw "short-end decline, long-end rise": reducing bets on short-term rate hikes while simultaneously increasing risk compensation for long-term inflation uncertainty and the Federal Reserve's credibility—shifting from pricing "rate hike" to pricing "fed credibility."

However, this interest rate extreme is an opportunity to test Warsh. When faced with extreme scenarios, will the Fed Put come, and in what manner? The market is eager to see Warsh's expression and market stabilization attitude, which is particularly important in the post-Powell era.

Before the "Warsh put," the market first saw the familiar "Bessent put." On August 19, at a sensitive moment when long-term U.S. Treasury yields had risen sharply, the U.S. Treasury announced that from September 9 to November 4, it would at least double the liquidity support repurchase scale for 10-20 year and 20-30 year nominal Treasury bonds, raising the single repurchase cap from $2 billion to at least $4 billion. According to the previously announced schedule, there will be 7 long-end repurchases during this period, corresponding to at least an increase of $14 billion in purchasing capacity The core of this repurchase by the Ministry of Finance is to reduce the long-term supply that the market needs to absorb in the short term and to improve the supply-demand structure of the long-term bond market through maturity swaps. The Ministry of Finance has increased the repurchase of 10-30 year government bonds. If financing is more completed through short-term bonds or newly issued bonds with shorter maturities, it is equivalent to replacing part of the existing long-term bonds with more liquid short-term debt, which can alleviate the liquidity pressure and term premium of long-term bonds in the short term, thus having a certain effect on stabilizing the market—after the announcement, the yield on 10-year U.S. Treasuries fell by about 7 basis points at one point, and the yield on 30-year U.S. Treasuries fell by nearly 10 basis points, indicating that the market quickly priced in this policy support.

However, this operation does not change the U.S. fiscal deficit and the overall financing needs of the government; it merely alters the maturity structure of debt issuance. Therefore, this is more like a temporary "peak shaving" of the supply pressure at the long end, which can alleviate market imbalances in the short term but is unlikely to fundamentally reverse the upward pressure on long-term interest rates caused by fiscal expansion and increased debt supply.

![Image](https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/3df2e6d8aa1da184c3b600b943580e83.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

**Another minor contradiction is that the risk of high oil prices reduces short-term interest rate disturbances, but long-term inflation concerns intensify.**

On August 18, Brent crude oil rose for the third consecutive day, reaching a monthly high of $92 per barrel. Unlike before, this time the market did not significantly raise expectations for short-term interest rate hikes by the Federal Reserve; instead, the market pricing for a rate hike in September decreased compared to the previous week. However, the greater concern has shifted to the possibility that high oil prices could make the inflation path stickier in the coming years, leading investors to demand higher inflation risk compensation and term premiums from long-term bonds.

![Image](https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/e2dcc1a08880c939b93f4871afb14ab5.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

**Finally, the gray rhino of Japanese bonds amplifies the risk contagion and emotional resonance in the global long-term bond market.**

Recently, U.S. fiscal pressures have resurfaced and entered the market pricing framework for long-term bonds. Last week, the Congressional Budget Office (CBO) raised its deficit forecast for fiscal year 2026 from $1.9 trillion estimated in February to $2.1 trillion, mainly due to a Supreme Court ruling that led to a significant shortfall in tariff revenue compared to previous estimates. Additionally, as of the first ten months of fiscal year 2026, the U.S. fiscal deficit has reached approximately $1.798 trillion, exceeding the $1.629 trillion for the same period in fiscal year 2025, and it may continue to rise in the next two months.

In addition to U.S. Treasuries, G10 sovereign bond yields have also been rising recently. On one hand, the overall direction of monetary policy in major economies is leaning towards tightening. The swap and futures markets show that the policy rate expectations for the next 6-12 months in South Korea, Japan, Canada, Europe, and the UK are higher than those in the U.S. Besides rate hike expectations, there are also widespread concerns about fiscal sustainability in various countries. For example, the Japanese market is betting on the possibility of rate hikes under a weak yen environment set by the Bank of Japan, as well as pricing the risks of high government expansionary fiscal policies. European ultra-long-term government bonds face dual pressures from fiscal uncertainty and inflation The 30-year U.S. Treasury bond is not an isolated market. Ultra-long government bonds and high-rated corporate bonds from countries such as the U.S., Germany, the U.K., and Japan essentially belong to the long-duration assets favored by global insurance companies, pension funds, and sovereign wealth funds. Therefore, when risk contagion occurs, the term premium demanded by investors tends to rise collectively.

**The depreciation of the yen is also seen as a potential "gray rhino" risk for U.S. Treasuries.** The yen appreciated briefly after the joint intervention by the U.S. and Japan, but soon weakened again, indicating that Japan is currently facing a very tricky policy triangle—wanting to prevent the yen from continuously depreciating, while also unable to bear a rapid rise in domestic interest rates, and needing to maintain financial and fiscal stability. In the future, Japan's demand for continued intervention in the foreign exchange market is likely to persist.

The repatriation of domestic funds in Japan may also impact U.S. Treasuries. As Japan's risk-free interest rates continue to rise, after currency hedging, the yield advantage of U.S. Treasuries relative to Japanese bonds may further diminish. This could lead to a slow structural change, with the world's largest overseas holder of U.S. Treasuries reducing its marginal allocation demand for U.S. long bonds. Japan's holdings of U.S. Treasuries in June have decreased by approximately 2.3% month-on-month to $1.116 trillion. When the Federal Reserve's control over long-term rates weakens and overseas demand for U.S. Treasuries marginally declines, quantitative easing (QE) may be the last resort—this also explains part of the recent rise in gold prices.

Looking ahead, the Bessent Put and the upcoming Jackson Hole meeting provide a short-term window for the recovery of long bond rates, but under the backdrop of fiscal supply pressure and the discounting of the Federal Reserve's credibility, sustainability should not be overestimated. The key point is that the scale of AI capital expenditures and the corresponding financing growth are likely to further increase; based on this, the supply-demand relationship for global long-term capital may continue to deteriorate; Japanese long bond yields, the yen, and Japanese institutions' overseas asset allocation may also form new negative feedback. **All of these are pressuring the Federal Reserve to adopt a more accommodative stance and pushing gold prices higher.**

![Image](https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/711fd766bfdd02037792558c54c7d519.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

![Image](https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/93907bb4a8b38cc3c255468451ad2145.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

![Image](https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/e43c760fc5d9b2ce0cdf947738b8ccaf.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

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