To what extent is the rise in long-dated rates attributable to AI?
At a Glance
Lead — The rise in long-dated rates, which is partially driven by AI-related spending and productivity, underlines the complex interlinkages between technology and finance. Per the full note from ING, approximately 20% of the recent upward pressure on long-dated rates can be attributed to AI dynamics, with the spending aspect accounting for one-third of current economic growth. As long-end rates are responding to heightened capital markets issuance by technology firms, this environment reflects a blend of productivity gains and persistent inflationary pressures, particularly ahead of central bank rate decisions. The market consensus for EUR/USD reflects a median target of 1.1700 for March 2026, with rates expected to remain range-bound amidst these influences.
Key Takeaways
- 01Long-dated rates are affected by AI, contributing approximately 20% to the rise.
- 02AI spending and productivity are forecasted to drive significant corporate issuance in the TMT sector.
- 03Current consensus target for EUR/USD is 1.1700 for March 2026, within a range of 1.1200 to 1.2000.
- 04Future movements may hinge on ongoing central bank policy shifts related to inflation.
Full Analysis
What the desk is arguing
The observation that long-dated rates are influenced significantly by AI dynamics is a critical focus for FX traders. Per the full note from ING, 20% of the total impact on long-dated rates comes from AI, with approximately 70% linked to productivity and 25% related to actual AI issuance. The spending and capital markets outputs of evolving technologies are malleable factors that need to be considered in rate forecasts and broader FX strategies.
The note draws on the anticipated structural shift in capital markets as technology firms ramp up their capital spending. As annual investment approaches $1 trillion, especially in the Tech, Media, and Telecommunications (TMT) sector, continued high levels of issuance can be expected, suggesting sustained upward pressure on long-dated rates that traders should monitor closely.
Where it sits in our coverage
For the EUR/USD pair, our current consensus target is 1.1700, with a range of 1.1200 to 1.2000 for March 2026. Specific firm targets include: - socgen: 1.1700 - rbc: 1.1600 - barclays: 1.1700
This view aligns closely with the cross-firm consensus, particularly with EUR/USD targets concentrated similarly within the community.
How other firms see it
Many firms appear to be aligned with a moderate bullish stance on EUR/USD, reinforcing expectations that long-dated rates will remain influential in determining currency trajectories. nomura and investec share similar sentiment with their respective targets leaning towards 1.1700, supporting the overall narrative outlined by ING.
In tune with ongoing discussions around AI and central bank policies, the EUR/USD trajectory is likely influenced by broader monetary policy signals from both the ECB and the Fed, particularly as debates around inflation persist.
Market Implications
Traders should monitor long-dated rates carefully, particularly as capital markets issuance escalates in the TMT sector, which will directly influence currency valuations. A critical level to watch for EUR/USD will be the 1.1700 target set for March 2026, which may prompt market volatility dependent on central bank communications.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
MUFG | Bullish | 1.1800 |
Danske Bank | Bearish | 1.1100 |
UBS | Bullish | 1.1800 |
From the original
Articles To what extent is the rise in long-dated rates attributable to AI? Published 12:30 Credit Rates TMT AI Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Probably 20% of the total influences. And of that, 70% reflects productivity and 25% is AI
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