5% Yielding US Treasuries Fall Out of Favor! BlackRock: Sovereign Bonds Are No Longer the First Choice; the AI Debt Wave Is the Best Opportunity in Years

BlackRock, Inc. (BLK.US) Global Chief Investment Officer of Fixed Income Rick Rieder said that the AI-driven debt boom is creating the most attractive fixed income investment opportunities in years, even more appealing than long-term US Treasuries. "I've never seen anything like the scale of financing that's flooding into both the bond market and the equity market," the BlackRock, Inc. Global Chief Investment Officer of Fixed Income said in an interview. "I've spent most of my career waiting for 7% yields." Rieder noted that the surge in financing around GPUs, data centers and other AI infrastructure is particularly attractive. He prefers secured debt from established companies and assets that generate cash flow, while also viewing equity valuations in semiconductors and computing as reasonable. The AI industry is undergoing a massive capital expenditure cycle, with hyperscalers potentially spending up to US$1 trillion a year on the technology, which is expected to reshape the global economy. This expansion has pushed global investment-grade AI-related financing past US$300 billion in 2026, roughly three times the full-year total in 2025. "This is one of the most exciting investment periods I've ever seen. I spent the entire weekend studying some of these deals and participated in some of them in a fairly significant way," Rieder said. He said the sheer volume of new issuance has improved pricing compared with the past, offering investors more attractive entry points. Largest US Investment-Grade Bond Issuance This Year By contrast, 10-year US Treasuries have "taken a back seat" among fixed income opportunities. Even with yields above 5%, Rieder increasingly views them less as a core investment and more as a market barometeroften used to gauge equity market moves. He said investors can instead earn yields of about 7% in short-duration, single-A rated portfolios while avoiding the duration risk associated with long-term government bonds. Outside the US, Rieder favors opportunities in long-end Japanese rates and attractive yields in emerging markets, though he warned that political events, including Brazil's election, warrant caution. He remains cautious on French bonds, expecting continued volatility, and has limited exposure to RMB-denominated bonds because they "lack appeal relative to other opportunities."