Castle Securities Analyzes US Debt Sell-off, AI Investment Boosts Capital Demand

Recent sell-offs in US Treasury bonds have driven yields to their highest levels in decades. Castle Securities believes that the core factors behind this trend are robust US economic growth, along with fiscal spending and investments in artificial intelligence that have collectively increased the demand for capital. Noshad Shah, head of fixed income sales for Europe, the Middle East, and Africa at Castle Securities, warned that if yields continue to rise, the market may need to reassess growth prospects, policy paths, or term premiums. In a client report, Shah noted that the increase in the yield of the US 10-year Treasury bonds in September was almost entirely due to real yields, with inflation expectations remaining relatively stable. Higher real yields reflect an economy supported by fiscal easing, loose financial conditions, and large-scale investments in artificial intelligence. Shah stated that the market is re-pricing the strength and sustainability of growth, as well as the real interest rates needed to accommodate this growth, with investors demanding higher after-tax returns, not just more inflation protection.

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