Global Investment Surge Ends the Era of Ultra-Low-Cost Capital
Fed Chair Kevin Warsh told the G20 opening plenary in Asheville on August 31 that the post-financial-crisis "global savings glut" has given way to a "global investment surge." The U.S. 10-year Treasury touched 4.76%—its highest since January 2025—while the 30-year hovered near 5.27%. Abroad, Germany's 10-year Bund hit 3.31% (unseen since 2011), and Japan's 2-year yield reached 1.73% (its highest since 1995).
Warsh's framing carried weight because the data already supported it. On August 28, 10-year TIPS yielded 2.34% against a nominal 4.67%, leaving inflation compensation at roughly 2.3 percentage points—well-anchored. The elevated nominal rates are being sustained by high real yields, reinforced by an ACM-derived term premium estimated around 0.75%.
Four bidders, one pool
The mechanism is straightforward. Global saving and investment must equal each other after the fact. What has changed is that desired investment, at the interest rates of the 2010s, now exceeds desired saving by a wide margin. AI companies, electric utilities, defense ministries, and sovereign treasuries are all pulling from the same fixed-income balance-sheet capacity.
| Bidder | Scale |
|---|---|
| AI | Goldman Sachs estimates ~$1 trillion of global AI-related investment in 2026, with $581 billion in the U.S., climbing from 1.8% to 2.8% of GDP by 2028. Technology rose to 16.7% of global nonfinancial corporate bond issuance in 2025, up from 11.6% a year earlier. |
| Defense | World military expenditure hit $2.887 trillion in 2025. NATO members have committed to 5% of GDP on defense-related investment by 2035; the EU's Readiness 2030 architecture aims to mobilize €800 billion. Governments do not cancel missile programs when the IRR dips below a corporate hurdle. |
| Sovereigns | U.S. public debt crossed $40 trillion in August. Treasury doubled selected long-end buyback operations after the 30-year yield reached its highest since 2007—a liquidity measure, not a supply fix. |
PIMCO notes that AI-linked issuance now competes with sovereign debt for investor capital.
The new neutral
The June FOMC median longer-run fed-funds estimate was 3.1%, and San Francisco Fed research places the medium-run real natural rate near 1.5%. Add the 2% inflation target and nominal neutral sits around 3.5% before any term premium. In that arithmetic, 4–5% on the 10-year may be a market-clearing price. J.P. Morgan's base case has the 10-year at 4.70% at year-end; its downside-growth scenario reaches only 4.20%.
Who bleeds
Proofpoint recently extended $4.3 billion of debt at roughly 9.3%. A $100 million-EBITDA company carrying 5.5x leverage pays:
| Interest rate | Annual interest bill |
|---|---|
| 6% | $33 million |
| 9.3% | $51 million (55% more cash consumed before taxes, maintenance, or principal) |
More than $40 billion of speculative-grade software debt matures by 2028, and U.S. maturities rated B- and below jump from $56.6 billion in 2026 to $215 billion in 2028.
The cleanest dividing line runs along funding source:
- A software company growing 30% while producing free cash flow can absorb elevated real rates.
- One growing 30% while burning cash and refinancing every three years faces an existential cost-of-capital problem.
- Utilities: those with rapid rate-base recovery compound; those front-funding billions while regulators lag become leveraged spread trades, with S&P already warning that record capex plus high rates erode balance-sheet strength.
Where the rent migrates
Economic rent is migrating toward whoever controls the scarce prerequisite, measured in years of replacement time, while downstream product cycles turn over in months:
| Scarce asset | Lead time / horizon |
|---|---|
| Large transformers | Multi-year lead times |
| Gas-turbine order books | Extended |
| HBM shortages | Through at least end-2027 |
| Energized land with grid interconnection | Finite |
NVIDIA's $500 billion infrastructure-financing initiative with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR reveals the direction: the rent collector is increasingly the owner of contracted, secured infrastructure cash flows.
| Investment wrapper | Reality |
|---|---|
| Data center with investment-grade take-or-pay commitments and secured power | Financeable infrastructure |
| Speculative neocloud with short customer contracts, expensive debt, and aggressive residual-value assumptions on depreciating accelerators | Leveraged technology exposure in an infrastructure wrapper |
The decisive distinction for capital allocation through 2028: scarce, contracted, and self-funded versus abundant, merchant, and refinancing-dependent. Capital keeps migrating toward the former until physical bottlenecks clear—or a recession destroys enough demand to reverse the flow.
Not investment advice.