Citadel Securities Analyzes U.S. Treasury Sell-Off: AI Investment Intensifies Capital Competition

U.S. Treasuries have recently faced a sell-off, with yields climbing to multi-decade highs. Citadel Securities believes that the core driver of this trend is not a deterioration in inflation expectations but rather stronger U.S. economic growth, coupled with fiscal spending and artificial intelligence (AI) investments, which have collectively increased demand for capital. Nohshad Shah, Head of EMEA Fixed Income Sales at Citadel Securities, warned that if yields continue to rise, the market may need to reassess growth prospects, policy paths, or term premiums. Term premium refers to the additional return investors demand for holding long-term bonds. In a client report on Monday, he noted that the rise in the U.S. 10-year Treasury yield in September was almost entirely driven by real yields, while inflation expectations remained relatively stable. Real yield refers to bond returns adjusted for inflation.