Global market volatility could persist into 2027 despite an expected easing in US Treasury yields, Fitch Ratings warned in a report published on October 30, 2026. The agency pointed to rising real interest rates and concerns that companies may be spending too much on artificial intelligence.

Key Takeaways

  • Fitch expects the US 10-year Treasury yield to fall to 4.8% by the end of 2027, while warning it could be higher.
  • The agency forecasts a US policy rate of 4.25% through 2027, including one more rate increase before the end of 2026.
  • Oil supply disruptions and a reassessment of AI investment returns are among the risks Fitch identified.

Global market volatility and the Treasury outlook

Fitch’s base case is for bond yields to stabilize, with the US 10-year Treasury yield retreating to 4.8% by the end of 2027. The yield was around 4.927% on October 29, down 0.062 percentage points at the time of reporting.

The agency said higher bond yields have reflected rising inflation-adjusted interest rates. It also expects one additional US interest-rate increase before the end of 2026, following the Federal Reserve’s unanimous September increase, its first in three years.

In its separate September global economic outlook, Fitch discussed rising real rates and the risks associated with an AI-driven investment boom. The September outlook is not identified as the specific report behind the October 30 warning.

Oil and Treasury demand pose upside risks

Fitch cautioned that oil supply disruptions through the Strait of Hormuz lasting beyond the first quarter of 2027 could push crude prices above its baseline and add pressure to bond yields.

The agency also pointed to narrowing yield spreads over Japanese assets as a likely contributor to flattening net foreign purchases of US Treasuries. The Federal Reserve’s balance-sheet reduction and rapid bond issuance by AI-focused hyperscalers could increase competition for investor funds, it said.

AI spending raises credit concerns

Fitch said rapid capital spending growth would remain a major credit risk heading into 2027. Improving open-weight AI models relative to frontier models, alongside expanding investment plans, have raised concerns that companies may be overestimating how much spending can be sustained.

A substantial reassessment of AI’s long-term earning potential could lead companies to cut capital spending sharply, with consequences for issuers across the AI value chain and wider capital markets, the agency warned.

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