Warsh says AI’s hyperscalers are part of why your borrowing costs are rising: ‘The competition for capital is real’

The Federal Reserve raised its benchmark rate by a quarter point on Wednesday, to 3.75-4%. But the rate that matters more for mortgages, corporate loans, and the federal government’s interest bill is the 10-year Treasury yield, which the Fed doesn’t set, has been rising for months, and just hit the psychologically terrorizing 5%.When a reporter asked Fed Chair Kevin Warsh what was behind that rise, he gave three reasons; one of which was due to the surge of AI debt swimming in the bond markets. 

“The so-called hyperscalers are out in the market raising funding,” Warsh said. “And so the competition for capital is real. And I think it partly explains the increase in yields.”

The argument is simple: there is only so much money to lend at any given time. When Amazon, Microsoft, Alphabet, Meta, Oracle and Coreweave borrow hundreds of billions of dollars to build data centers, they compete with the U.S. Treasury and everyone else for that money, and the price of borrowing goes up. Warsh........

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