Long-term U.S. Treasury yields may be pricing in expectations of an AI-driven productivity boom rather than solely reflecting inflation or fiscal concerns, according to Jacob Manoukian, U.S. head of investment strategy at JPMorgan Private Bank.
The bond market’s upward move in yields could indicate investor confidence in future efficiency gains from artificial intelligence investments, Manoukian told the Reuters Global Markets Forum on August 28, 2026. This view contrasts with prevailing concerns over inflation and swelling government debt, suggesting a more constructive outlook for economic growth driven by AI adoption.
AI-related corporate debt issuance has accelerated sharply, reaching $220 billion year-to-date, more than double the total recorded in 2025. U.S. corporate bond issuance has climbed to $1.68 trillion, up nearly 27% from the same period last year. Analysts at JPMorgan Private Bank project AI-related issuance could account for half of U.S. Treasury coupon issuance by year-end, signaling a substantial increase in long-term debt supply.
The surge in AI-related borrowing reflects spending by hyperscalers on data centers and related infrastructure, intensifying competition for capital at the long end of the bond market. This development has contributed to a widening discount between two-year forward and trailing twelve-month price-to-sales multiples for semiconductor companies, now at 40%-50%, compared with a historical norm of 20%. Semiconductor valuations have also corrected by more than 20% in recent months.
JPMorgan Private Bank’s fixed income strategy favors shorter-duration credit over outright duration exposure, citing overly hawkish rate pricing. The bank highlights attractive carry opportunities in credit spreads as a buffer against potential rate hikes. In the U.S., the strategy prioritizes bank preferred securities, which benefit from tax advantages via qualified dividend income treatment and offer higher capital structure seniority than common equity. In Europe, the bank favors high-yield credit, citing resilient corporate fundamentals despite elevated yields, rising government debt, and energy-supply risks.
Manoukian noted that while peak earnings may already be priced in, further appreciation is possible if companies meet analyst sales forecasts. He added that if markets continue to value trailing twelve-month earnings at the same level projected for 2028, material upside could materialize for certain stocks.
