US Treasury Market 'Staggers' Amid AI Investment Frenzy... What is Kevin Warsh's Response?

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As the AI investment boom shakes the bond market, Wall Street is focusing on the response of former Federal Reserve (Fed) Governor Kevin Warsh.

According to MarketWatch on September 3 (local time), selling pressure intensified in the $31.5 trillion U.S. Treasury market. Benchmark interest rates rose to their highest level since Donald Trump's second term as U.S. president. As AI infrastructure investment and corporate fundraising simultaneously surged, competition for funding in the bond market has become even fiercer.

Approximately $200 billion in U.S. investment-grade corporate bonds are expected to be issued in September alone. Thomas Kikis, Head of U.S. and Americas Markets at Standard Chartered, predicted that the bond market would be “moving frantically” from Labor Day to Christmas. He emphasized, “The market needs stability and trust.” This assessment suggests that large-scale corporate bond issuances and initial public offerings (IPOs) could converge simultaneously.

The AI investment race was cited as a key variable increasing pressure on the bond market. AI-related capital expenditures are projected to increase to approximately $1.1 trillion by 2027. As companies procure funds for AI infrastructure construction from the bond market, the competitive structure where the U.S. government and corporations vie for the same funds is strengthening.

Deutsche Bank expects the supply of U.S. investment-grade corporate bonds to reach an all-time high this year. This analysis suggests it could even surpass the large-scale refinancing volume seen during the COVID-19 pandemic. However, as funds consistently flow into investment-grade bond funds, corporate bond credit spreads have remained relatively stable.

Wall Street's attention is turning to Warsh. Although U.S. Treasury Secretary Scott Bessent has also moved to stabilize the bond market, investors are focusing on the Fed's response after Warsh's Jackson Hole speech. This is because annual U.S. interest costs have already exceeded $1 trillion, and AI investment and fiscal burdens are simultaneously increasing demand for funds.

[Article Key Summary]

-Amid intensifying selling pressure in the U.S. Treasury market, the issuance of investment-grade corporate bonds in September is expected to be approximately $200 billion.

-AI-related capital expenditures are projected to increase to approximately $1.1 trillion by 2027, further intensifying competition for funds in the bond market.

-Wall Street is focusing on former Fed Governor Kevin Warsh's ability to stabilize the market in a situation where fiscal burden and corporate bond supply are simultaneously expanding.

*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*