Krugman says AI boom, not Trump, is driving higher bond yields
Paul Krugman wrote that rising borrowing costs are a worldwide phenomenon tied to a surge in AI investment and corporate demand for funds. He said he does not think the Trump administration is responsible for high long-term rates and criticized Treasury Secretary Scott Bessent’s efforts to suppress yields.
Economist Paul Krugman argues that rising bond yields stem from technology sector spending rather than Donald Trump administration policies. , and Japan. Rather than blaming domestic political leadership, Krugman pointed to a shift in corporate borrowing. “The simplest story consistent with the facts is that we’re seeing a surge in demand for funds as a result of the AI boom,” Krugman wrote.
” Read Also: Mohamed El-Erian Warns Higher Oil, 'Massive Bond Issuance' Are Driving Global Yield Surge Ahead Of Fed Meeting Treasury’s “Tiny Stick” Against Markets While Krugman absolved the administration of causing the yield spike, he criticized Treasury Secretary Scott Bessent ’s attempts to suppress it. 85%—its highest level since October 2023. S. ” “It is, however, foolish of Bessent to imagine that he can beat rising rates back by talking big while waving his tiny, tiny stick,” Krugman wrote.
Inflation and Geopolitical Pressures The Treasury’s inability to dictate yields is compounded by external market pressures. -Iran war has pushed Brent crude oil above $102 a barrel, reviving inflation fears. As the Kobeissi Letter observed, the bond market is “quite literally fighting the US Treasury” as geopolitical conflicts continue ahead of next week’s Federal Reserve interest rate decision. You can't make this up.
The US Treasury just announced it is tripling long-term buybacks to $6 billion and yields STILL rallied on the news. com/WWWtwBpzVw — The Kobeissi Letter (@KobeissiLetter) September 9, 2026 How Have Stocks and Bonds Performed? 52%. S.
06 on Thursday. 21% over the last month. 34% year-to-date. 26% YTD.
On Thursday, the SPDR S&P 500 ETF Trust (NYSE: SPY ) and Invesco QQQ Trust ETF (NASDAQ: QQQ ), which track the S&P 500 and Nasdaq-100, respectively, were lower. 42. 49. Read Also: Forget NVDA: Peter Thiel's New $419 Million Portfolio Bets Big on the Power Behind AI Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published editors.
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