Global Market: Rising real yields raise fresh risks for stocks and global economic growth

Inflation-adjusted borrowing costs have climbed to their highest levels in more than a decade across major economies, as heavy bond issuance by governments and large technology companies raises concerns about the impact on equity markets and global economic growth, Reuters reported.

Real yields, which measure the return investors demand from bonds after accounting for inflation, are a key gauge of underlying borrowing costs. They are influenced by expectations for economic growth, interest rates and the supply and demand for capital.

In the United States, 30-year real yields, measured through inflation-linked bonds, are hovering near 18-year highs at around 3%. Ten-year real yields in Britain and Germany are also trading close to their highest levels in more than a decade.


A major driver has been the surge in borrowing by large technology companies investing heavily in artificial intelligence, while governments continue to run sizeable fiscal deficits. Investors are demanding higher returns to absorb the growing supply of bonds entering the market.

Alphabet, Amazon and Meta have issued nearly $220 billion of bonds so far this year, already more than double the $108 billion raised during the whole of 2025, based on LSEG data.

Government borrowing is also adding to the pressure. The U.S. budget deficit is expected to be around 6% of GDP, or $1.9 trillion, this year, while France and Britain are projected to run deficits of about 5% and 4%, respectively.

In Europe, spending on defence, energy security and infrastructure is adding to borrowing needs, while stronger economic growth, particularly in the United States, is also contributing to higher real yields. Reuters noted that the withdrawal of central banks from bond-buying programmes has further removed a source of demand that had previously helped suppress yields.

The rise in real yields has also pushed up nominal borrowing costs globally, with inflation expectations remaining relatively stable despite the Iran conflict. The U.S. Treasury on Thursday paid 5.22% at a 30-year bond auction, the highest borrowing cost for such an auction since 2001.

Rising real yields pose risk to stocks
Higher real yields can make bonds more attractive relative to equities because investors receive better inflation-adjusted returns from fixed-income assets. They can also reduce the present value of companies' future cash flows, putting pressure on stock valuations.

Equities have so far remained resilient, supported by strong corporate earnings and relatively robust economic activity. JPMorgan has raised its earnings forecasts for the S&P 500, while LSEG I/B/E/S data indicates that profits at European blue-chip companies are expected to record their fastest growth since late 2022.

However, the risk could increase if technology companies increasingly rely on debt to finance their AI investments. Reuters reported that some market strategists expect higher real yields to eventually constrain the borrowing that has helped fuel the recent equity rally.

Elevated borrowing costs could also weigh on households and businesses by encouraging them to reduce consumption and investment, potentially slowing economic growth.

U.S. real yields remain below levels that some investors consider particularly damaging to economic activity. But market participants are increasingly viewing current levels as a warning sign, especially as longer-term fiscal pressures remain unresolved.

With governments showing limited appetite for reducing budget deficits and companies continuing to seek capital for large-scale investments, the structural forces pushing real yields higher could persist. Reuters reported that investors are therefore becoming increasingly cautious about longer-dated bonds and the broader implications of sustained higher real borrowing costs.

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