U.S. national debt has reached $40 trillion and the federal budget deficit is on track to hit $2 trillion this fiscal year, with debt servicing costs alone at $1 trillion annually. Yet AI hyperscalers continue to issue massive amounts of corporate debt to fund chips, data centers and other infrastructure, to the point of being nearly yield-agnostic, according to Treasury Secretary Scott Bessent. U.S. investment-grade corporate bond issuance totaled approximately $1.7 trillion through July, up 27% year-on-year, and is on track to exceed $2 trillion for the first time. This AI-driven corporate debt surge is so strong that Ed Yardeni sees a classic crowding-out effect pushing Treasury yields higher, a phenomenon Jurrien Timmer, director of global macro at Fidelity Investments, described as reverse crowding out in the corporate bond market.
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