The sharp rise in U.S. Treasury yields is primarily driven by growing fiscal risk rather than the wave of technology-company borrowing tied to artificial intelligence, according to Robin Brooks, a senior fellow at the Brookings Institution. Before its recent decline, the 10-year yield climbed above 5% and reached a 24-year high after the Iran war began and oil prices surged. The U.S. budget deficit widened to $1.99 trillion in fiscal 2026, while net interest payments on the national debt rose 8% to $1.05 trillion, outpacing economic growth. The market-implied yield on 10-year Treasuries issued in 10 years did not fall as an artificial-intelligence-driven explanation would predict, which Brooks says confirms the case for a rising fiscal risk premium. These costs amount to about $2.9 billion per day and 3.2% of GDP, a record level that creates a cycle in which higher debt produces higher interest rates and even more debt.
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