Fitch Warns AI Investment Uncertainty, Higher Treasury Yields Raise Risks in Global Credit Markets
Summary
- Fitch said uncertainty over AI investment, rising energy prices, and deteriorating funding conditions are increasing risks in global credit markets as 2027 approaches.
- Fitch said it expects the Federal Reserve's policy rate to rise once more this year and then hold at 4.25% through 2027, while the yield on the U.S. 10-year Treasury reaches 4.8% by the end of 2027.
- Fitch said AI infrastructure investment could become a risk factor if it exceeds sustainable demand, with related spending potentially contracting sharply after an excessive buildout.
Forecast Trend Report by Period
Fitch Ratings warned that uncertainty over artificial intelligence investment, rising energy prices and tighter funding conditions are increasing risks in global credit markets as 2027 approaches.
Walter Bloomberg reported on October 28 that Fitch identified uncertainty over the outlook for AI investment, elevated energy prices and tighter financial conditions as the main risk factors.
Fitch forecasts the Federal Reserve's policy rate will rise once more this year to 4.25% and remain at that level through 2027.
It also expects the yield on the 10-year U.S. Treasury to reach 4.8% by the end of 2027. Fitch added that the yield could rise above that forecast if shipping disruptions in the Strait of Hormuz persist.
Fitch also cited the risk that AI infrastructure investment could exceed sustainable demand. If investment expands too far beyond actual demand, related capital spending could contract sharply, it said.
JH Kim
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