To what extent is the rise in long-dated rates attributable to AI?
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.
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.
How firms align with this view
Aligned with the desk view
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.
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.
Risks to this view
The primary risks to this call stem from unexpected changes in central bank monetary policies, particularly from the Fed and the ECB. A shift towards aggressive rate increases would likely alter expectations around long-dated yields, potentially leading to a reversal in trends.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
MUFG | Bullish | 1.1800 |
Danske Bank | Bearish | 1.1100 |
UBS | Bullish | 1.1800 |
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 issuance.
It's a view based absolutely on what the numbers say, but in the end it's a judgement call (as objective as doable, overlaid with a large dollop of subjectivity) Padhraic Garvey, CFA , Jan Frederik Slijkerman and Timothy Rahill AI issuance pressure is having an impact on long-end rates, but so are inflation and fiscal deficits The spending piece has a small, but not an inconsequential impact There are three basic AI components to account for, namely: 1. The spending piece, 2. The capital markets piece, and 3.
The productivity piece. The spending piece is relatively straightforward, as it's a straight accounting in GDP. My colleague James Knightley has dealt with this in detail here .
Basically, AI accounts for a third of current economic growth. The link here with rates is the tendency for higher growth to be loosely associated with higher rates. However, given that the economy outside of AI is less dynamic, the AI piece is more of a filler than anything else.
The capital markets issuance piece has a more pursuasive impact The capital markets piece is more complex. ING's Jan Frederik Slijkerman did a deep dive into this space recently; it's here . For 2026, he identifies TMT as a meaningful driver of additional corporate issuance in the US, and something similar in Europe.
Jan Frederik goes on to argue that, while technology companies fund the bulk of their investments from operating cash flows, their rapidly increasing capital spending is weighing on corporate savings rates. As annual investment moves towards US$1 trillion, and a chunk of this is refinancing, the prognosis ahead is for issuance volumes to remain elevated. So what you see in 2026 should at least be repeated in 2027 and beyond.
My colleagues Timothy Rahill and Marine Leleux have crunched the latest corporate supply numbers for the US and Europe . They note that year-to-date USD corporate issuance has hit US$878bn, exceeding full-year corporate issuance recorded in every year from 2021 through to 2024, and running 54% above the same period last year. The increase is driven by TMT, tripling to US$330bn.
They also note that issuers have favoured the long end of the curve. Year-to-date issuance in maturities of 17 years and longer totals US$235bn, making it the largest maturity bucket, ahead of 9–12 year tenors (US$219bn). Equivalent issuance along the 10yr to 30yr part of the US Treasury curve sums to US$340bn.
Sources & References
How we cover this story
Related news on this pair
EUR/USD eyes 1.12 as JPY pairs bounce - How far can they rally? Can USD/JPY break 159?
EUR/USD approaching 1.12 and USD/JPY potentially capped below 159 suggest consolidated dollar weakness with yen pairs rebounding from oversold conditions.
EUR/USD at new lows: Will the sell-off end?
EUR/USD testing new lows signals sustained USD strength; watch technical support levels for potential reversal signals or confirmation of further depreciation.
EUR/USD Price Forecast: Downside pressure might intensify below 1.1300
Technical break below 1.1300 would signal acceleration of existing EUR/USD downtrend; monitor support levels for potential stops or position exits.