SocGen Says Higher Yields May Put AI Debt Capex at Risk

SocGen Says Higher Yields May Put AI Debt Capex at Risk

Bloomberg

Tue, September 15, 2026 at 12:36 PM GMT+3

Kokou Agbo-Bloua, global head of economics, cross-asset and quant research at Societe Generale Corporate and Investment Banking, discusses the rising 10-year Treasury yield and its impact on debt-fueled artificial intelligence capex. "If it goes to let's say 5.5% to 6% and growth doesn't pick up, because it's there simply reflecting higher nominal GDP, then you can sort of break the whole economics of AI debt capex," Agbo-Bloua tells Bloomberg Television.

00:00 Speaker A

We knew that these yields were going to rise. I mean, no one had given me frankly a a good idea of of why would they would stop rising. And then you see it above 5% and your heart sinks a little bit. Like, what would stop this rise?

00:13 Speaker B

Well, I think there's a confluence of uh a lot of points. I think the key one is that the uh biggest buyer of Treasury used to be uh the Fed. So, before um the uh COVID crisis, we were at roughly 4 trillion dollars of balance sheet. We peaked at 9 trillion in 2022. And now we are roughly at 675. So they reduced the balance sheet by 2.2 trillion. In addition to that, you have obviously the deficit, uh 5.8 trillion. You have 2 trillion of debt service now. Um but I think there's also an interesting point which is the uh Fed chair Hall of Mirrors uh problem, which is that the Fed through forward guidance was essentially telling the market where it saw interest rates, then the market priced that expectation. And when the Fed looks at the market, it was literally looking at itself. Hence the blind leading the blind. So this is creating more uncertainty and additional term premium. And add to that, Japan, China reducing their balance, their treasury exposure as well. So, one of the key point I think is the Druckenmiller points on let the bond market speak. And it is simply reflecting stronger nominal GDP growth. So if you

01:21 Speaker A

Is there a I mean, if it goes to 5.5, if it goes to six, I mean, what else does it break in the markets?

01:27 Speaker B

This is a good point. I think if you look at nominal GDP, we are let's say 2% um real GDP growth, and then you have 3% inflation. So fair value for Treasury should be around, let's say five, five and a half if you have term premium. So if it goes to let's say 5 and a half, six and growth doesn't pick up because it's there simply reflecting higher nominal GDP, then you can sort of break the whole economics of AI debt, uh CAPEX, for example. Um because you can see the uh order book coverage ratio was five times in February and now is going down to two times. So investors are becoming more price sensitive to fuel the AI CAPEX cycle.