The warning came from Bangkok, where more than 18,000 delegates had gathered for the annual meetings of the International Monetary Fund and the World Bank, and it was aimed at the market most of them treat as the floor beneath everything else.
In its Global Financial Stability Report, released Tuesday, the IMF said government bond yields in several advanced economies have climbed to multidecade highs and could rise further in a disorderly fashion. The adjective is the operative one. A disorderly move is one that outruns the institutions built to absorb it, and sovereign debt is the collateral against which much of the financial system borrows.
The fund described three pressures building at the same time. Energy costs pushed higher by conflict in the Middle East have revived inflation risk, which argues for central banks keeping policy tight for longer. Public debt sits near its highest level since the Second World War and is on course to pass 100% of gross domestic product, which raises the cost of rolling over what has already been borrowed. And the companies building artificial intelligence have begun competing with governments for the same pool of patient money.
That third source is the newest and the least tested. The share of global investment-grade bond issuance taken by hyperscalers has risen to about 10% from less than 1% since 2024, the report said, as Alphabet, Meta and a lengthening list of AI laboratories borrow hundreds of billions of dollars, much of it longer-dated. Sovereign issuers and AI issuers now turn up in the same investor mandates, bidding for the same duration.
“The impact could be severe given the foundational importance of sovereign bond markets,” the fund wrote. A sharp rise in yields would mark down asset values through higher discount rates, including for AI-related assets, and erode the value of government bonds that lenders post as collateral.
The positions inside the market sharpen the risk. Hedge funds’ share of the Treasury market has more than doubled to about 9% in 2025 from roughly 4% in 2022, the fund said, a concentration that leaves Treasuries susceptible to what it called a disorderly unwind. When a borrowed position has to be closed, the sale does not wait for a buyer to agree on a price. It takes the price that is offered.
The IMF also flagged a web of circular financing arrangements among AI companies as a channel that could carry a shock further than its origin would suggest. In structures of that kind, one company’s spending is another company’s revenue, and both can be recognized before either is settled in cash.
What makes the warning unusual is its target. The fund has spent decades advising emerging markets on debt discipline. This report points at the balance sheets of advanced economies, at the market that prices their borrowing, and at a technology boom financed in part by the same investors who buy government debt.
Yields have already moved. Ten-year rates in several advanced economies sit near levels not seen in a generation, lifted by energy costs and by expectations that inflation will prove stickier than central banks had hoped. Each step higher raises the interest bill on debt issued when money was cheap. Governments refinancing this year pay the new rate, and the difference lands in a budget that was written on the old one.
The build-out of data centers adds a second-order effect that few forecast when the spending began. Those facilities are financed with debt, and the debt competes with sovereign bonds for buyers who care about duration and credit quality. A fund manager allocating a fixed pool of capital can hold a government bond or a hyperscaler’s paper. The choice is not additive.
Central banks compound the arithmetic. Several have been shrinking the bond holdings accumulated during the pandemic, which leaves the market with one fewer standing buyer at the moment supply is rising. The IMF has warned that the buffer of official demand, long taken for granted, is thinner than it was.
None of this predicts a crisis. The fund stopped short of naming a trigger or a date, and markets have absorbed heavier debt loads before without losing order for long. What the report does is remove a comfort, which is the assumption that the world’s safest asset is insulated from the pressures building around it.
The transmission is easy to trace even if the timing is not. Yields rise, collateral is worth less, lenders ask for more margin, and the most borrowed holders sell first into a market that has already turned cautious. Pension funds and insurers that hold government bonds as reserves are exposed to the first step rather than the last, and they are not in a position to trade out of a falling market quickly.
“Resurgent inflation or fiscal concerns could drive a sharp rise in sovereign bond yields,” the report said, citing risks to asset valuations, collateral markets and the wider financial system. The language was deliberate. The fund has criticized governments for years over deficits; this time it told them that the market which funds those deficits has become more fragile at the same time.
For the finance ministers in Bangkok, the message was unwelcome and plain. The room to borrow has narrowed just as the bills are largest, and the newest competitor for that money is a technology whose spending plans assume capital stays cheap. Neither side of that contest can resolve it alone, and both are counting on the other to blink.
A disorderly move, if it comes, will not announce itself as one. It will look at first like a bad week in a market that has had bad weeks before, and only afterward like the moment the safest asset stopped behaving that way.
