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Wed, 02 Sep 2026

Wed, 02 Sep 2026 Faisal Islam: Why bond market wildfire is keeping world leaders up at night

Huge AI spending plans and the ongoing war in Iran are driving up borrowing costs around the world.

* Global bond markets are experiencing a significant shift, with countries facing higher interest rates and increased borrowing costs.
* The immediate reason for this change is the ongoing conflict between the US and Iran, which has pushed up oil prices and inflation expectations.
* However, there is a bigger picture at play: rising demand for borrowing across the world, driven by both governments and big tech companies.
* Tech giants such as Google, Amazon, and Meta are issuing massive amounts of debt to fund investments in AI data centers, with some expecting them to raise $400-$500 billion this year.
* This increased competition is pushing up interest rates and making it more expensive for governments to borrow money.
* Japan's government bond yields have reached 30-year highs due to the country's high debt burden and declining yen value.
* The UK's government borrowing costs are also rising, driven by concerns over the credibility of the Labour Party's economic plans and the stability of the government.
* The PM is hoping to rebuild the economy with a 10-year plan expected in November, but it needs to address concerns about excessive spending and show investors that he can be decisive on key issues.