The IMF warns bond yields could spike in a disorderly way and flags leverage in AI and private credit

The International Monetary Fund has warned that bond yields could see a disorderly spike as debt and inflation risks worsen, CNBC reported². The fund urged debt managers to lengthen maturities, warning that rollover risk could be made worse, and its discussion extended to yield curve control². In its own blog post the fund said global financial markets face rising risks from AI, bond yields and cyberattacks, that debt needs to be put on a sustainable path, and that leverage and liquidity mismatches in AI, private credit and other nonbank financial sectors should be addressed¹.

The fund also located the equity risk geographically. The United States could be worst hit by an AI market correction, MarketWatch reported, citing the fund’s view that a reappraisal of AI productivity gains would set off a domino effect and that US equity prices could fall³. One account of the same report said the fund warned an AI market correction could cut global GDP by 0.4% by 2028⁴. These are the fund’s own projections, not observed outcomes^3,4.

Why it matters to investors

The leverage numbers are the mechanism. Hedge fund equity margin positions have reached around 15 percent of advanced-economy GDP, while leveraged exchange-traded funds have grown, according to the same summary⁴. That is the channel through which a repricing of AI expectations would be amplified rather than absorbed^1,4.

This is not the first such warning from an official body. The Register noted that the fund’s caution follows similar concerns raised by the Bank for International Settlements, which cautioned about the AI boom in June⁵. The Register’s own framing was that the AI bubble could burst and take the global economy with it⁵.

The fund’s language is about vulnerabilities rather than predictions of a crash: it calls for leverage and liquidity mismatches in AI and private credit to be addressed, which is a supervisory recommendation¹.

What to watch

Private credit is where the fund’s nonbank warning is already visible in market behaviour. Record redemptions and low fundraising are squeezing private credit funds, with redemption demand spiking in the first quarter and remaining elevated in the second, spurred by negative headlines about the sector’s exposure to software companies, PitchBook reported⁷.

Managers are drawing the parallel themselves. Carlyle has warned private credit not to repeat its software mistake with AI, flagging concentration risks in lending to the AI buildout⁶. Watch whether that concentration shows up in fund marks rather than in commentary^6,7.

On the sovereign side, the test of the fund’s advice is whether debt managers actually lengthen maturities, since that is the specific action it recommended against rollover risk^1,2.