Sharp rise in global bond yields poses huge challenge for emerging markets, says DEA secretary
Global bond yields cannot be understood only in terms of monetary policy or fiscal deficits, scale of AI buildout is now part of that story
- Oct 4, 2026,
- Updated Oct 4, 2026 9:26 PM IST
Economic Affairs Secretary Anuradha Thakur on Sunday said the sharp rise in global bond yields poses a challenge for emerging markets and that they are no longer only about monetary policy or fiscal deficit but also about Artificial Intelligence.
"Bond markets have always been important but are assuming a larger and larger share of it," she said at the Kautilya Economic Conclave, noting that government bonds now amount to more than 80% of the global GDP, making sovereign bond markets the largest pool of investments and debt and the benchmark for the price of capital across the financial system.
Read More: India now stands at a pivotal moment in its developmental journey, says Shaktikanta Das
"Governments are borrowing heavily while investors are demanding greater compensation for inflation, fiscal uncertainty, and duration risk. This has pushed up term premium and long-term yields," she further said. The 10-year US bond yields are the highest since 2002, and Japan 10-year bond yields are the highest since 1996.
"For emerging markets, this poses a huge challenge. Global bond markets set the opportunity cost of capital, and added to this aspect are global imbalances," Thakur said.
When trade is organised around security and geostrategic concerns over comparative advantage, goods and capital move less frequently, surpluses and deficits become sources of friction, and the price of capital further rises for everyone around the world.
Must Read: FPI outflows have nothing to do with their belief in India growth story: Neelkanth Mishra
Thakur further highlighted that another dimension to the changing global capital landscape, which is beginning to change the demand for and potentially the price of capital is the Artificial Intelligence investment cycle.
"This is not limited to software or computing, it requires data centres, semiconductors, reliable electricity and transmission capacity, investments into which are creating significant demand for capital and are increasingly being financed through debt," she said. More investments would require greater demand for savings, while higher borrowings would mean that financial markets have to absorb a large supply of debt.
Global bond yields, therefore, cannot be understood only in terms of monetary policy or fiscal deficits anymore, she said, highlighting that the scale of AI buildout is now part of that story.
Economic Affairs Secretary Anuradha Thakur on Sunday said the sharp rise in global bond yields poses a challenge for emerging markets and that they are no longer only about monetary policy or fiscal deficit but also about Artificial Intelligence.
"Bond markets have always been important but are assuming a larger and larger share of it," she said at the Kautilya Economic Conclave, noting that government bonds now amount to more than 80% of the global GDP, making sovereign bond markets the largest pool of investments and debt and the benchmark for the price of capital across the financial system.
Read More: India now stands at a pivotal moment in its developmental journey, says Shaktikanta Das
"Governments are borrowing heavily while investors are demanding greater compensation for inflation, fiscal uncertainty, and duration risk. This has pushed up term premium and long-term yields," she further said. The 10-year US bond yields are the highest since 2002, and Japan 10-year bond yields are the highest since 1996.
"For emerging markets, this poses a huge challenge. Global bond markets set the opportunity cost of capital, and added to this aspect are global imbalances," Thakur said.
When trade is organised around security and geostrategic concerns over comparative advantage, goods and capital move less frequently, surpluses and deficits become sources of friction, and the price of capital further rises for everyone around the world.
Must Read: FPI outflows have nothing to do with their belief in India growth story: Neelkanth Mishra
Thakur further highlighted that another dimension to the changing global capital landscape, which is beginning to change the demand for and potentially the price of capital is the Artificial Intelligence investment cycle.
"This is not limited to software or computing, it requires data centres, semiconductors, reliable electricity and transmission capacity, investments into which are creating significant demand for capital and are increasingly being financed through debt," she said. More investments would require greater demand for savings, while higher borrowings would mean that financial markets have to absorb a large supply of debt.
Global bond yields, therefore, cannot be understood only in terms of monetary policy or fiscal deficits anymore, she said, highlighting that the scale of AI buildout is now part of that story.