Pimco suggests that AI has not yet constituted a "duration supply shock", current US bond yields are driven by expectations of monetary policy.

Pimco's statement that the artificial intelligence-related lending boom may have a greater impact on the bond market in the future, but the idea that this force has dominated the recent rise in long-term U.S. Treasury yields seems to be exaggerated. Lotfi Karoui, a multi-asset credit strategist at Pimco, wrote in a report that AI investments supported by debt financing may ultimately push up risk premiums, which is the extra return required when investors hold higher-risk or longer-term assets, but this process is likely to unfold gradually over several years. He said that the current rise in long-term U.S. Treasury yields is more reasonably explained by the increased inflation risk from the Iran war, leading to changes in market expectations of the Fed's interest rate path. Karoui wrote, "Structural pressure brought about by AI construction does exist, but its upward process is slow, and it is not the driving factor behind the yield trends that investors are currently seeing. Cyclical factors still support the role of bonds in hedging."