“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“A full-throated defense of economic dynamism.” - The Wall Street Journal
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
“Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
A broad archive on economic output and the forces that shape it, including growth, business cycles, inflation, housing, trade, and financial markets. Use these curated charts and research summaries to follow changes in the U.S. and global economy.
AI Summary.A global bond sell-off pushed long-term borrowing costs in the US, Europe and the UK to their highest levels in decades, with the 30-year US Treasury yield reaching 5.73%, its highest since 2002. Investors cited concerns over inflation and high public debt burdens, with French and Italian yields also rising.
Ian Smith, Emily Herbert and Kate DuguidFinancial Times
Date Posted:
The US 10-year Treasury yield fell to 5.29% from 5.36% after strong auction demand. The 30-year yield rose to as high as 5.73%, its highest level since 2002, before settling at 5.66%.
Are inflation and debt worries pushing long-term yields to decades-highs?
Core argument: The 30-year US Treasury yield rose as much as 0.09 percentage points to 5.73%, its highest level since 2002, before easing to 5.66% following a strong 10-year Treasury auction.
A sell-off in US government bonds eased after an auction of 10-year Treasuries drew strong demand in a sign that investors were seeking to lock in the highest yields since the turn of the millennium. US 10-year Treasury yields, a benchmark for borrowing costs in the world’s biggest economy, climbed as high as 5.36% in volatile trading early on Wednesday. But yields fell back sharply after a $39bn auction went smoothly, with the 10-year recently trading at 5.29%. France’s 10-year borrowing costs rose to 4.87%, heading back towards the post-2002 high reached this month, amid persistent worries that the Eurozone’s second-biggest economy was heading for a debt reckoning.
Takeaways by Macro Roundup® AI
The 30-year US Treasury yield rose as much as 0.09 percentage points to 5.73%, its highest level since 2002, before easing to 5.66% following a strong 10-year Treasury auction.
A global bond sell-off pushed long-term borrowing costs in the US, Europe and the UK back to their highest levels in decades, as fears over inflation and high public debt burdens rattled investors.
French and Italian government bond yields each rose more than 0.1 percentage points, extending a series of wild swings in European government debt markets.
Related Articles:
France is the Biggest Loser in the Global Rates Reset— French government borrowing costs now exceed the country's nominal income growth by about 2 percentage points, the most unfavorable gap between borrowing costs and growth in the rich world. By contrast, Spanish and Greek bond yields remain about 2 percentage points below their income growth rates.
Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong?— An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
How Might Fiscal Policy Respond to the Rise of Artificial Intelligence?— The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
AI Summary.The Bloomberg Dollar Spot Index rose as much as 0.5% alongside oil prices following a pickup in Iranian attacks on vessels in the Strait of Hormuz, approaching a new peak for the year. Nearly all Group of 10 currencies weakened against the dollar, with the euro lagging all its major peers.
Anya Andrianova and Melos AmbayeBloomberg
Date Posted:
The Bloomberg Dollar Spot Index is approaching a record high for the year as political risk from France weighs on the euro, though it remains ~4% under its pre-Liberation Day level.
Does rising shipping conflict strengthen the dollar against major currencies?
Core argument: The Bloomberg Dollar Spot Index rose as much as 0.5%, approaching a new peak for the year, alongside a rise in oil after a pickup in Iranian attacks on vessels in the Strait of Hormuz.
The Bloomberg Dollar Spot Index rose as much as 0.5% alongside oil after a pickup in Iranian attacks on vessels in the Strait of Hormuz. The gauge is approaching a new peak this year. Nearly all currencies in the Group of 10 have weakened against the greenback, with the euro lagging behind all its major peers.
Takeaways by Macro Roundup® AI
The Bloomberg Dollar Spot Index rose as much as 0.5%, approaching a new peak for the year, alongside a rise in oil after a pickup in Iranian attacks on vessels in the Strait of Hormuz.
Nearly all Group of 10 currencies weakened against the dollar, with the euro lagging all of its major peers.
Related Articles:
Foreign Capital Flows Into US Stocks Hit Record As Appetite For Debt Fades— Foreign investors made a record $942bn in net purchases of US stocks and investment fund shares over 12 months, the highest rolling 12-month total in Treasury data going back to 1985. Foreign demand for US debt securities moved in the opposite direction, falling to a net $188bn in the second quarter from $314bn in the first.
World’s Unusually High Dollar Exposure Risks Fueling Selloff— Pension funds and insurers in Canada, Denmark, Australia, Taiwan, Japan and Finland hedged just 41% of their foreign-currency exposure, the lowest share since at least 2015. With some of the largest holders of US assets carrying little protection against a weaker dollar, the currency is at risk of steeper declines if sentiment turns.
Financing the AI Buildout— The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
AI Summary.Large US cloud and artificial-intelligence companies have raised $48bn in European-currency bonds, more than triple the prior year's total, spread across €27bn, £13bn and CHF7.5bn. The issuance adds highly rated US borrowers to European credit indices and deepens the thin market for longer-dated maturities, with few signs so far of crowding out other issuers.
Huw van SteenisApollo
Date Posted:
Hyperscalers have raised $48B in European-currency bonds this year, more than 3x all of 2025. They now account for 3% of euro IG issuance, 10% of sterling and 22% of Swiss franc, versus 8% in the US.
Are European bond markets funding the US AI buildout?
Core argument: Hyperscalers have raised $48 billion in bonds denominated in European currencies this year — €27 billion, £13 billion and CHF7.5 billion — more than triple the full-year 2025 total.
Hyperscalers have raised $48 billion in bonds in European currencies this year, already more than triple the entire amount raised last year. This breaks down as €27 billion, £13 billion, and CHF 7.5 billion. There are few signs of crowding out: non-hyperscaler IG issuance remains strong and little changed YoY, and corporate spreads remain tight. Rather, hyperscalers are adding highly rated US borrowers (AA- or higher) to European credit indices that have traditionally had more A-to-BBB exposure. Hyperscalers account for 7% of euro issuance with maturities of 10 years or more, versus 3% across all maturities, and 3% of the 10-year-plus euro IG index versus 1% of the overall index. This adds depth at longer-dated maturities—thin outside sovereign issuance—at a time when some governments, including the UK, have been shortening duration.
Takeaways by Macro Roundup® AI
Hyperscalers have raised $48 billion in bonds denominated in European currencies this year — €27 billion, £13 billion and CHF7.5 billion — more than triple the full-year 2025 total.
Hyperscaler issuance shows few signs so far of crowding out European borrowers, with non-hyperscaler investment-grade issuance little changed year-over-year and corporate spreads still tight.
Hyperscalers account for 7% of euro issuance with maturities of 10 years or more versus 3% across all maturities, adding borrowers rated AA- or higher to indices traditionally weighted toward A to BBB.
Related Articles:
Financing the AI Buildout— The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
AI Set to be Largest CapEx Cycle Ever … and Soon Majority Externally Financed— Hyperscaler and data-center investment is tracking toward $1.5tn annually by 2030, which in real terms would exceed the 2005-06 housing boom, the 1990s fiber peak, and the 1882 railroad peak combined. External debt and equity are projected to fund close to 90% of the buildout, making it dependent on credit markets.
AI Is Driving Up Treasury Yields: ‘It Just Touches Everything’— Investment-grade companies have sold nearly $1.5tn of bonds, up 36% from a year earlier, and some investors have sold US Treasuries to buy higher-yielding corporate debt. Bank of America economists estimate the surge in corporate-debt sales, along with more mortgage-backed securities issuance, pushed 10-year rates up by about 0.3 percentage point.
AI Summary.Federal Reserve Bank of New York researchers estimate that about 26% of a uniform tariff passes through into non-oil consumer goods prices over twelve months, with roughly 64% of that effect coming directly from higher import prices and the rest through domestic producers' input costs and markups. Pass-through into import prices is nearly immediate, while domestic price responses build gradually.
Mary Amiti,Sebastian Heise and David WeinsteinFederal Reserve Bank of New York
Date Posted:
FRBNY estimates that a uniform 10% tariff raised consumer-goods prices 2.6% after 12 months: 1.7pp directly via imported final goods, and 0.9pp mainly via higher imported-input costs for domestically produced goods, with the latter effect building over 9–12 months.
How much of a tariff reaches consumer prices within a year?
Core argument: Amiti, Heise, and Weinstein estimate that a uniform tariff passes through to non-oil consumer goods prices at roughly 26 percent over twelve months, with a 10 percent tariff raising prices 2.6 percentage points, 1.7 points of it via the direct import channel.
Tariff pass-through into U.S. import prices is nearly complete. Instrumenting realized duty rates with statutory tariffs to account for endogenous sourcing and exemptions, tariff pass-through into consumer-goods import prices is about 90.5%; a 10% increase in the duty rate raises import prices about 9.1%. At twelve months, a uniform 10% tariff raises consumer-goods prices 2.639%: 1.694pp through the direct channel, 0.770pp through marginal costs, and 0.175pp through strategic complementarity. Import-price pass-through is essentially immediate, while domestic prices adjust gradually; the contribution of the two indirect channels roughly doubles between six and twelve months, with much of the overall adjustment occurring within nine to twelve months. For the actual 2025–26 tariffs, the direct channel accounts for about 70% of the estimated effect; the marginal-cost channel accounts for about 22%, with strategic complementarity accounting for the remainder. Because the regressions include date fixed effects, the tariff contribution is identified relative to less-exposed goods and should be read as illustrative rather than as the absolute contribution to aggregate goods CPI.
Takeaways by Macro Roundup® AI
Amiti, Heise, and Weinstein estimate that a uniform tariff passes through to non-oil consumer goods prices at roughly 26 percent over twelve months, with a 10 percent tariff raising prices 2.6 percentage points, 1.7 points of it via the direct import channel.
The two indirect channels — marginal costs from imported inputs (0.77 percentage points) and strategic complementarity in domestic markups (0.17 points) — account for 36 percent of the total effect and roughly double between six and twelve months after tariff implementation.
Applied to the actual 2025–26 tariff schedule, the authors estimate the cumulative tariff contribution to goods CPI reached about 2.9 percentage points by February 2026, with import-price pass-through near 90 percent and retail pass-through of 0.56.
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The State of U.S. Tariffs July 24, 2026— The average statutory US tariff rate stands at 11.1% and, under current law including scheduled increases, is projected to reach 11.8% by year-end. The authors estimate current-law tariffs will raise consumer prices by about 0.7% and generate roughly $1.9tn over ten years, with revenue somewhat lower after accounting for tariffs' negative effect on economic output.
Who Is Paying for the 2025 U.S. Tariffs?— The authors estimate that 94% of U.S. tariff costs were borne domestically over the first eight months of 2025, with a 10% tariff associated with only a 0.6 percentage point decline in foreign export prices. Pass-through into U.S. import prices later declined to 86%, shifting more of the burden to foreign exporters.
Demand-Driven Inflation— Demand and supply curves estimated from pre-pandemic data imply relatively flat demand curves in the US and euro area, so adverse supply shifts would produce large output losses but comparatively little inflation. The authors argue explaining the observed combination of high inflation and output requires outward demand shifts, including accommodative monetary policy alongside fiscal expansion.
AI Summary.Incorporating tariffs into the standard cost-of-capital framework, researchers estimate US tariffs raised the economy-wide marginal effective tax rate on new investment by 4.2 percentage points to 17.0%, with equipment hit hardest at 26.1 percentage points. That increase offsets the 3.5 percentage point reduction from the One Big Beautiful Bill Act.
Kyle Pomerleau, Thomas Brosy, Robert McClelland and John WongAmerican Enterprise Institute
Date Posted:
The IEEPA tariffs through January 2026 raised equipment’s user cost of capital 9%, from 17.7% to 19.3%. With depreciation unchanged, the required pre-tax net return rose 1.6pp, 4.3% to 5.9%, a tax at purchase that expensing cannot eliminate.
Do tariffs raise the effective tax rate on new investment?
Core argument: Tariffs in force before the February 20, 2026 Supreme Court ruling in Learning Resources v. Trump raised the economy-wide marginal effective tax rate on new US investment by 4.2 points, from 12.8 percent to 17.0 percent, and the cost of capital by 2.7 percent, the AEI authors estimate.
The standard Hall-Jorgenson user cost of capital framework defines the minimum gross required return on an additional unit of capital. The service price of capital (SS) is the minimum pretax gross return required on a new investment; the minimum pretax net return (ρrho) equals SS minus economic depreciation. Consider imported equipment requiring a 25% gross return: 20% to cover depreciation and 5% shareholders’ demanded return. A 10% tariff raises the cost of capital to 27.5%. [Thus the minimum pretax net return—the hurdle rate—rises from 5% to 7.5%]. For equipment, tariffs raise the cost of capital 9%, from 17.7% to 19.3%: 86% of the burden is direct, 14% indirect. 100% bonus depreciation reduced the equipment METR from 19.1% to 4.1%; tariffs raised it to 30.3%, more than offsetting the tax cut.
Takeaways by Macro Roundup® AI
Tariffs in force before the February 20, 2026 Supreme Court ruling in Learning Resources v. Trump raised the economy-wide marginal effective tax rate on new US investment by 4.2 points, from 12.8 percent to 17.0 percent, and the cost of capital by 2.7 percent, the AEI authors estimate.
Equipment bore the largest estimated burden, with its marginal effective tax rate rising 26.1 points from 4.1 percent to 30.3 percent and its cost of capital up 9.0 percent, while mainframes and PCs saw a 26.6 percent cost-of-capital increase.
The estimated 4.2 point tariff-driven increase in the marginal effective tax rate offset the One Big Beautiful Bill Act’s 3.5 point reduction, leaving a net 0.8 point rise economy-wide and an 11.1 point net increase for equipment.
Related Articles:
Blunt Tariffs Undermine Efforts To Reshore High-Tech Manufacturing— Computer and electronic products manufacturers import 37% of their intermediate inputs and capital equipment, chemical manufacturers 33%, and transportation equipment manufacturers 27%. Broad tariffs may push some sourcing domestically over time, but many inputs will simply cost more, making American manufacturers less competitive globally.
Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States— The authors find that the combined effect of U.S.-China trade war import tariffs, retaliatory tariffs, and farm subsidies on employment in exposed U.S. locations was at best a wash and possibly mildly negative, while residents of tariff-protected areas became less likely to identify as Democrats and more likely to vote Republican.
Tariffs are Dumb Enough to (Almost) Work— A universal 15% tariff on imported goods could raise roughly $300–$400bn annually, a fraction of what a value-added tax would generate but real revenue given U.S. imports of about $4tn. The author argues tariffs are a poorly designed form of consumption tax that could build political groundwork for replacing them with a more efficient value-added tax.
AI Summary.U.S. crude oil production rose from about 5m barrels per day in the late 2000s to nearly 14m by 2025, turning the country from a major petroleum importer into a net exporter. The authors estimate that adverse oil supply news shocks, which once contracted industrial production, now expand it.
Diego Känzig, James Stock and Luca ZanottiNational Bureau of Economic Research
Date Posted:
The US shifted from a large net oil importer to a net exporter around 2010. Computing separate impulse responses pre-and post-2010, Känzig, et al find that adverse global oil-supply news switches from reducing US industrial production to raising it by a similar magnitude.
Has becoming a net oil exporter reversed how supply shocks affect output?
Core argument: Before 2010, an adverse oil supply news shock produced a persistent contraction in U.S. industrial production of roughly -0.6 percent after a year, while from 2010 onward the point estimate turns positive over most horizons and peaks near +1 percent.
As Figure 2 shows, U.S. crude oil production rose from roughly 5 million barrels per day in the late 2000s to almost 14 million barrels per day by 2025. Over the same period, net imports of crude oil and petroleum products fell steeply and turned negative in 2019. The United States thereby went from being one of the world’s largest petroleum importers to a net petroleum exporter. We examine whether the U.S. response to oil supply news shocks differs in the post-shale period by allowing the impulse responses to change from January 2010 onward. Figure 7 reports the results. Before 2010, an adverse oil supply news shock produced a persistent contraction in industrial production, reaching roughly -0.6 percent after a year. From 2010 onward, the point estimate instead becomes positive over most horizons and reaches almost +1 percent at its peak. Both the pre-2010 contraction and the post-2010 expansion are economically large and statistically significant over a range of horizons. This contrast mirrors the evidence from the time-varying VAR.
Takeaways by Macro Roundup® AI
Before 2010, an adverse oil supply news shock produced a persistent contraction in U.S. industrial production of roughly -0.6 percent after a year, while from 2010 onward the point estimate turns positive over most horizons and peaks near +1 percent.
U.S. crude oil production rose from roughly 5 million barrels per day in the late 2000s to almost 14 million barrels per day by 2025, with net imports of crude oil and petroleum products turning negative in 2019.
The pre-2010 contraction and the post-2010 expansion in U.S. industrial production following oil supply news shocks are both economically large and statistically significant over a range of horizons, mirroring evidence from a time-varying VAR.
Related Articles:
U.S. Economy Less Vulnerable To Geopolitical Oil Price Shocks Than In The Past— The United States became a net oil exporter in late 2019, and oil and oil product spending fell from near 8% of GDP in 1980 to 3% in 2024. The authors estimate a 15% global oil supply disruption would now cut annualized U.S. real GDP growth by 0.3pp, versus 1.7pp in the rest of the world.
Fighting Words: The Energy Transition in 2026— Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.
Power Politics: Energy Self-Sufficiency in a Modern Mercantilist World— China leads in adding power to the grid, with more than 30,000 miles of ultra-high-voltage transmission lines versus zero in the US and lead times for large transformers of 48 weeks against a US average of 143 weeks. This positions China to accommodate new demand sources such as artificial intelligence.
AI Summary.The 10-year US Treasury yield has risen past its 2007 high to its highest level since 2002, with the latest move driven by a US services survey showing services inflation proving intractable. The share of supply managers reporting rising prices climbed to its highest level since the post-pandemic surge.
John AuthersBloomberg
Date Posted:
The US 10-year Treasury yield is at its highest level since 2002. Authers notes: “A move of this magnitude should be a problem for equities. It hasn’t been…. On the face of it, the big tech companies are proving immune to the rising cost of money” likely due to rapidly growing earnings.
Are rising long-term bond yields driven by stubborn services inflation?
Core argument: The 10-year Treasury yield has broken above its 2007 high, the year a bond sell-off triggered the Global Financial Crisis, reaching its highest level since 2002.
The 10-year Treasury yield has now broken through its high from 2007, when a bond sell-off triggered the Global Financial Crisis. It’s now the highest since 2002. The latest impulse upward came from the ISM Services report for the US. Services inflation is proving intractable, and the proportion of supply managers complaining about rising prices climbed to its highest since the post-pandemic surge. With the exception of a few months at the top of the oil price spike in 2008, and in the brief spasm that followed Hurricane Katrina in 2005, the reading is the strongest since the series began in 1997.
Takeaways by Macro Roundup® AI
The 10-year Treasury yield has broken above its 2007 high, the year a bond sell-off triggered the Global Financial Crisis, reaching its highest level since 2002.
The ISM Services report drove the latest upward move in yields, with services inflation proving intractable and the share of supply managers reporting rising prices climbing to its highest since the post-pandemic surge.
Apart from a few months at the peak of the 2008 oil price spike and the brief episode after Hurricane Katrina in 2005, the ISM Services prices reading is the strongest since the series began in 1997.
Related Articles:
Foreign Capital Flows Into US Stocks Hit Record As Appetite For Debt Fades— Foreign investors made a record $942bn in net purchases of US stocks and investment fund shares over 12 months, the highest rolling 12-month total in Treasury data going back to 1985. Foreign demand for US debt securities moved in the opposite direction, falling to a net $188bn in the second quarter from $314bn in the first.
US Focus: The Effect Of Soaring Profits— US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.
A Catalyst For The AI Bubble Break— Historically, controlling for valuations, a 1% rise in the share of the market represented by initial public offerings has been associated with roughly a 4% decline in prices. With large artificial-intelligence company listings expected and share issuance exceeding buybacks, equity supply could shift from shrinking about 1% a year to growing near 5%, implying returns roughly 20% below average.
AI Summary.Canada's core inflation is around 2% and its budget deficit about 2.4%, versus roughly 6% in the US, yet Canadian bond yields move with US yields. The author argues global AI-related debt issuance, including multibillion-dollar Canadian-dollar bonds from Google and Amazon, helps transmit higher US borrowing costs into Canada.
Paul PodolskyA Letter From Paul
Date Posted:
Canada’s 10-year yield rose from ~3% to ~4% despite a modest 2.4% budget deficit, slow domestic growth and 2% core inflation. Podolsky sees the US bond selloff as raising yields globally. “It can seem odd that bond markets trade in sync, but they do.”
Are US borrowing costs being exported to Canada through global AI debt?
Core argument: Canada’s core CPI runs near 2% and its budget deficit near 2.4%, versus roughly 6% in the US, which the author attributes to Canada not being a meaningful part of the AI boom.
Core CPI in Canada is around 2%. This is because Canada is not a meaningful part of the AI boom and is also not running a big budget deficit. Canada’s budget deficit is around 2.4%, as opposed to about 6% in the US. Canada’s bond-market reward for the US’s truculent, guns-and-butter policy is higher borrowing costs and slower growth. In part this is because the AI debt issuance is global. In May, Google raised C$8.5B and in June Amazon raised C$14B, or about one-third of net new Canadian corporate issuance this year. Over time, however, markets often revert to pricing that accurately reflects local conditions. [The chart shows] yields in the US, Canada, and Canadian unemployment. As you can see, as US yields sell off, Canada sells off, even if Canadian employment conditions are tepid. Obviously, the US (orange line) has sold off more.
Takeaways by Macro Roundup® AI
Canada’s core CPI runs near 2% and its budget deficit near 2.4%, versus roughly 6% in the US, which the author attributes to Canada not being a meaningful part of the AI boom.
Canadian bond yields sell off alongside US yields even when Canadian employment conditions are tepid, leaving Canada with higher borrowing costs and slower growth, though US yields have sold off more.
Google raised C$8.5B in May and Amazon C$14B in June, together about one-third of net new Canadian corporate issuance this year, reflecting the global nature of AI-related debt issuance.
Related Articles:
Foreign Capital Flows Into US Stocks Hit Record As Appetite For Debt Fades— Foreign investors made a record $942bn in net purchases of US stocks and investment fund shares over 12 months, the highest rolling 12-month total in Treasury data going back to 1985. Foreign demand for US debt securities moved in the opposite direction, falling to a net $188bn in the second quarter from $314bn in the first.
AI Is Driving Up Treasury Yields: ‘It Just Touches Everything’— Investment-grade companies have sold nearly $1.5tn of bonds, up 36% from a year earlier, and some investors have sold US Treasuries to buy higher-yielding corporate debt. Bank of America economists estimate the surge in corporate-debt sales, along with more mortgage-backed securities issuance, pushed 10-year rates up by about 0.3 percentage point.
Is the AI Buildout Pushing Up Yields?— US saving-investment data show that non-financial corporations remain net savers, unlike the early-2000s information technology boom when they flipped to net borrowers and their capital spending accounted for the entire current account deficit. Government dissaving through the budget deficit, not the artificial intelligence buildout, is absorbing national resources.
