BlackRock turns bearish on long-term Treasuries as AI funding wave looms

By Davide Barbuscia

NEW YORK, Dec 2 (Reuters) - The BlackRock Investment Institute said connected Tuesday it is turning bearish connected semipermanent U.S. Treasuries, informing a coming question ​of AI-related financing could enactment upward unit connected U.S. borrowing costs and exacerbate worries implicit ‌U.S. authorities indebtedness.

In caller weeks, investors person been zeroing successful connected however large tech’s propulsion into AI volition apt mean hundreds of ‌billions successful caller indebtedness implicit the coming years. The added leverage is not expected to earnestly dent the sector’s inactive beardown equilibrium sheets, but the borrowing spree is unfolding against a backdrop of already elevated nationalist indebtedness successful the U.S. and different developed markets, stoking broader concerns astir rising leverage crossed the fiscal system.

"Higher borrowing crossed nationalist and backstage ⁠sectors is apt to support upward unit ‌on involvement rates," BII, a part of U.S.-based BlackRock focused connected concern research, said successful a 2026 planetary concern outlook report.

It said it turned "underweight" ‍on semipermanent Treasuries for the adjacent six to 12 months from a erstwhile "neutral" view.

"A structurally higher outgo of superior raises the outgo of AI-related concern and affects the broader economy," it said. "A much leveraged strategy besides creates ​vulnerabilities to shocks specified arsenic enslaved output spikes tied to fiscal concerns oregon argumentation tensions betwixt managing ostentation and indebtedness ‌servicing costs." U.S. nationalist indebtedness is astatine a grounds precocious of implicit $38 trillion.

The institute's concern outlooks are based connected views from elder portfolio managers and concern executives astatine BlackRock, the world's largest plus manager.

While an AI-driven productivity roar could yet enactment authorities gross and truthful easiness the U.S. indebtedness burden, specified a process volition instrumentality time, it said.

BlackRock remains optimistic that AI-related investments volition proceed to propel U.S. ⁠equities higher adjacent year, said the institute. But portion it ​expects AI-driven gross gains to assistance the system broadly, it besides ​anticipates that technological advances volition payment immoderate companies much than others.

"Entirely caller AI-created gross streams are apt to develop. How those revenues are shared is apt to germinate – and ‍we don’t yet cognize how.⁠ Finding winners volition beryllium an progressive concern story," it said.

Outside of the U.S., BlackRock turned much underweight for the adjacent six-to-12-month play connected Japanese authorities bonds owed to the imaginable ⁠of higher involvement rates and heavier enslaved issuance.