Sep 19, 2026 · 1h 8m
Higher Treasury yields reshape bonds, stocks, and AI bets
Why The 30-Year Treasury Lost Its Biggest Buyers | David Busch on Why High Yields Are Attractive Right Now
Rising government borrowing costs are testing the role of bonds, equity valuations, private credit, and the investment case for AI infrastructure.
- 1Heavy Treasury supply, inflation risks, geopolitical shocks, and energy prices are pushing long-term yields higher and challenging equity valuations.
- 2Intermediate-term Treasuries may offer more reliable portfolio ballast than long-duration bonds when stocks and bonds sell off together.
- 3AI’s expansion depends less on software enthusiasm than on earnings durability, energy availability, materials, industrial capacity, and power infrastructure.
Don't miss
David Busch identifies energy, materials, industrial capacity, and power availability—not just software innovation—as the key constraints on the AI buildout.
The brief
David Busch and Jack Farley examine why 10-year and 30-year Treasury yields have risen, and whether higher borrowing costs now threaten economic growth and equity valuations.
The long end faces heavier Treasury issuance, inflation and geopolitical risks, and weaker institutional demand, while insurers and private-credit investors weigh yield against duration and credit risk.
Busch favors roughly three- to seven-year Treasuries as portfolio ballast, arguing they may be more dependable than long bonds when inflation makes stocks and bonds fall together.
The AI buildout’s decisive constraints may be physical: energy, materials, industrial capacity, utilities, semiconductors, and community acceptance of power-hungry data centers.
Busch remains cautious on private credit products promising equity-like returns with bond-like risk, emphasizing loan tapes, defaults, collateral, fund structures, and disclosure.
The conversation closes on whether software stocks have overshot AI-disruption fears, while embedded data and workflow functions may protect platforms such as Bloomberg and CapIQ.
What was said on this episode
25 statements · 9 positive · 14 negative · 2 mixed
A catalyst may shift investors toward U.S. Treasuries from corporate or private credit debt.
“there may have to be a catalyst that forces investors to seek the shelter of a U S treasury versus an IG corporate or a private credit type facility.”
Listen at 15:23
Insurance companies trade lower duration risk for higher credit risk in private credit.
“they've shortened the duration, the duration risk, which is market risk for a bond. In this case, you're right, it's floating rate, but now they've amplified or turned up the dial on credit risk.”
Listen at 18:50
Thirty-year bonds have greater price sensitivity to interest-rate changes.
“a 30 year. bond has a greater change in market value given a change in interest rates.”
Listen at 20:55
Insurance companies have reduced duration and convexity risk while increasing liquidity and credit risk.
“what these insurance companies have done is they've turned down the duration risk, the convexity risk, and turned up liquidity and credit risk.”
Listen at 21:22
Insurance companies’ demand has shifted from long Treasuries toward private credit.
“the natural buyer of the long treasuries has shifted into more of that private credit versus going out into government debt or investment grade corporates.”
Listen at 24:20
Federal Reserve rate hikes reduce dollar supply and improve dollar purchasing power.
“when the Fed raises rates, they're taking dollars out of the system. And so the buying power of a dollar actually improves.”
Listen at 40:33
Gold can fall during Federal Reserve rate hikes despite equity-market weakness.
“periodically when the Fed raises rates, even though economically it may lead to a slowdown or a drawdown in the equity markets. But gold also falls”
Listen at 40:43
The U.S. dollar remains the world’s reserve currency.
“the dollar today is still the world's reserve currency.”
Listen at 41:47
The dollar remains relatively strong despite higher rates and economic concerns.
“right now... The dollar remains relatively strong, even though rates are higher and there is some concern about the health of the overall economy.”
Listen at 42:09
Equities should continue trending similarly if earnings support valuations.
“As long as earnings support these valuations, I think that we'll continue to. to trend in a similar direction.”
Listen at 42:34
AI infrastructure earnings misses or margin compression would increase market volatility.
“if we start to see margin compression there or earnings come in lower than expected or the forecasted earnings, market expectations of earnings miss as well, then we'll see some volatility.”
Listen at 42:51
Leveraged sectors are most vulnerable to the current interest-rate environment.
“The sectors that are probably most susceptible to the current rate environment that we're in is those that are leveraged.”
Listen at 43:11
AI adoption will improve software companies’ efficiency and margins.
“we're going to start to see efficiencies with these software companies, that they adopt the AI technology, improve their margins, improve their efficiency”
Listen at 45:07
AI adoption will reduce software-company employment and increase automation.
“it will likely mean less people working there and more automation.”
Listen at 45:16
Most Americans will not use general AI tools to complete their taxes.
“I just don't see a scenario where the majority of Americans are asking like a Claude or a ChadGPT or whatever to do their taxes for them.”
Listen at 45:22
Software-sector sell-offs caused by AI fears are excessive.
“I think a lot of those things are, you know, the sell-off in a lot of those sectors are overdone.”
Listen at 46:20
Software is likely oversold as AI adoption may improve efficiency and earnings.
“that sector is likely oversold and we'll see over the next several quarters, you know, their adoption of AI and AI technology and the efficiencies in the resulting earnings impact on each company.”
Listen at 47:12
Humans will continue seeking human interaction and expertise despite AI tools.
“Humans will still want to interact with other humans in a large way because we're social creatures, but also because we want that expertise.”
Listen at 47:52
Building a Bloomberg-like terminal sacrifices embedded workflow functionality.
“you either use the tool that's already built or you build your own but you miss some of the functionality and that's already embedded within the workflow itself”
Listen at 52:16
AI adoption can improve financial-company efficiency and profitability while reducing headcount.
“AI adoption for banking and insurance and. A lot of these financial companies, I think, can be beneficial because it'll allow for a more efficient work stream and potential reduction in headcount and, as a result, profitability.”
Listen at 52:50
Widespread AI adoption may eliminate entry-level corporate jobs and hurt labor markets.
“the job market may suffer a little bit because if we start adopting AI en masse across sectors, that entry level, that first step into the corporate world may be eliminated”
Listen at 53:33
Private credit products promising equity-like returns carry more risk than advertised.
“any time that a product is offering, because the way that these are being marketed is you're getting equity-like returns, but taking a bond-type credit risk. But anytime you're getting equity-like returns, you're taking more risk than what maybe they're saying is actually embedded within the strategy itself.”
Listen at 1:01:35
Most private-credit interval funds limit quarterly redemptions to about 5% of NAV.
“liquidity is gated on the back end. And most of them offer like 5% of NAV for redemption every single quarter.”
Listen at 1:02:06
David’s firm has largely avoided private credit because of client risks.
“For us, we've largely avoided private credit in general. And it's because of those risks that our clients would be subjected to.”
Listen at 1:04:41
Obtaining underlying loan-health information is difficult in private credit.
“But with private credit, getting those insights can be difficult.”
Listen at 1:06:20
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.