AI and Government Debt Push R-star Higher, Pressuring US Bonds

Macro Impact 4
โดย Money & Banking·US·Read original
Summary · why it matters

Reuters reports that selling pressure on US government bonds and rising bond yields may be significantly driven by the trend of R-star, or the neutral interest rate of the US economy, moving higher amid massive investments in artificial intelligence (AI) and high levels of government borrowing. R-star is the interest rate level that neither stimulates nor restrains economic activity. If R-star rises, interest rates in the economy may need to stay permanently higher than in the past, which would pressure bond prices and push yields up. Some analysts believe that the current R-star may be higher than the latest estimates, as the US economy faces a large demand for capital simultaneously, from private sector AI infrastructure investments and massive government borrowing. The New York Fed estimates R-star at 1.65% in the second quarter of 2026, slightly down from 1.73% in the first quarter, but still higher than 1.36% in the first quarter of 2025. Meanwhile, Federal Reserve Governor Christopher Waller said he is inclined to raise his own estimate of the neutral interest rate, as the status of US government bonds as a safe asset may decline amid concerns about the US fiscal position. US federal debt has risen to $40 trillion, while large technology companies such as Amazon, Microsoft, and Alphabet are increasing bond issuance to raise funds, intensifying competition for capital and potentially keeping the neutral interest rate elevated even if the Fed pauses rate hikes for a long time. However, some analysts believe that the impact of AI on R-star may not be permanent. If AI boosts productivity and reduces costs in the long run, it could instead become a downward pressure on inflation.

Impact on stocks 3

Artificial Intelligence▼ · 3 stocks
Amazon.com Inc
AMZN
▼ NegativeCapitalrelevance

Amazon is increasing bond issuance to fund AI investments, contributing to higher R-star and bond yields, which may raise its borrowing costs.

Alphabet Inc Class C
GOOG
▼ NegativeCapitalrelevance

Alphabet is increasing bond issuance to fund AI investments, contributing to higher R-star and bond yields, which may raise its borrowing costs.

Microsoft Corporation
MSFT
▼ NegativeCapitalrelevance

Microsoft is increasing bond issuance to fund AI investments, contributing to higher R-star and bond yields, which may raise its borrowing costs.

Theme Impact 3

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