(Drivebycuriosity) - The American interest rates are on a tear. Yesterday the yield of 10-year US treasuries jumped to 5.1% - a 19 years high ( cnbc). The media refers to inflation and the politics of the Federal Reserve. That does not make sense. Inflation & Federal Reserve decisions may influence the interest rates of the coming months, but over 10 years?
I believe that the market anticipates an economic boom created by the high corporation investments into AI. “The buildout of AI factories — the largest infrastructure expansion in human history — is accelerating at extraordinary speed" observes Nvidia CEO Jensen Huang (nvidianews ).
AI is rapidly expanding into robotics, self-driving cars and myriads other applications and will hike the productivity of the economy in the coming 10 years significantly. The rising productivity will hike company profits and accelerate economic growth substantially. Rising profits and faster economic growth will make consumers & CEOs more optimistic and inspire them to take more loans and the growing profits will justify higher interest rates.
Fasten seatbelts!
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