Higher Borrowing Costs Put Global Corporate Investment Under Pressure

A global rise in government bond yields is making it more expensive for companies to fund deals, factories and long-term projects. The effects are visible in dealmaking, which slowed sharply last quarter, but the picture is mixed: large technology spending continues, and many borrowers appear able to absorb higher interest costs for now.

How far yields have moved

The US 10-year Treasury yield rose above 5.35 percent on October 7, 2026, its highest level since 2002, according to a Forbes analysis. The 30-year yield reached about 5.70 percent. Other outlets cite slightly different peaks and dates, so exact levels depend on the day and the source. The Federal Reserve raised its benchmark rate by a quarter point to a range of 3.75 to 4 percent on September 16, according to the same analysis and a separate market review by Crestwood Advisors.

The rise is not only American. The Forbes piece points to higher yields in Japan, Britain and France, which have pulled US yields up with them. It cites several drivers: energy-driven inflation linked to the Iran conflict, heavy government borrowing, and a large volume of bond issuance tied to artificial intelligence spending. Goldman Sachs estimated $489 billion of AI-related bond supply so far this year, according to that analysis.

Long-term Treasury yields serve as a benchmark for corporate borrowing costs, so companies generally pay more on long-dated debt when they rise.

Where it shows up first: dealmaking

Global mergers and acquisitions totaled $993 billion in the third quarter, down 41 percent from the second quarter, according to LSEG data reported by Reuters. It was the first quarter below $1 trillion since the second quarter of 2025, and only ten deals topped $10 billion. Reuters linked the slowdown to rising borrowing costs and higher energy prices.

Bankers quoted in the report did not describe a collapse. Morgan Stanley's John Collins said higher yields make valuations "a little tougher" but that he was not calling a slowdown. Clifford Chance's Sarah Jones called the quarter "a normalization rather than an end of a cycle." Year to date, deal value is still up 28 percent at $3.9 trillion, the strongest start since 2001, although deal counts have fallen 8 percent.

Equity markets showed similar caution. Stock sales raised $284 billion in the quarter, down 26 percent from the second quarter but up 39 percent from a year earlier. Reuters noted that some IPOs have been delayed and that some investors are pausing on certain technology and AI-related deals.

Who feels it most

Not every company faces the same pressure. A PIMCO credit note from August, as summarized by a secondary source we could not fully verify, said most US investment-grade and high-yield borrowers could absorb higher refinancing costs, with interest coverage described as healthy though below post-pandemic peaks. The exception is the weakest tier. According to the same summary, CCC-rated issuers refinancing 2027 and 2028 maturities at today's yields could see coupons roughly double. That is a conditional estimate, not a forecast.

Firms that borrowed cheaply before 2022 and now face maturities are the likeliest to see the sharpest jump in interest expense. A 2025 European Central Bank analysis simulated that most maturing US corporate debt would be refinanced at higher rates, though that work predates this year's moves and should be read as an illustration.

The AI exception

The AI buildout complicates the story. Large technology companies and their suppliers are still spending heavily, and the bonds they sell add supply to a market already absorbing record government issuance. In that sense, corporate investment is both a cause of higher yields and a victim of them, as other borrowers compete for the same buyers. Analysts differ on how long that can continue, and none of the sources reviewed provided total capital spending figures for this quarter.

Bottom line

Higher borrowing costs are weighing on deals and on the least creditworthy companies first. Evidence of a broad pullback in investment is thinner than the headlines suggest, and several bankers expect activity to hold up. The next few weeks of inflation and central bank decisions will show whether this is a pause or a longer squeeze.