A sell-off in US Treasuries is pushing the 10-year yield toward the psychological 5% mark, adding to concerns about the cost of funding and debt sustainability. Against this backdrop, investors are focusing on US inflation data and the Federal Reserve’s next decisions. Rising oil prices, combined with geopolitical tension, could force central banks to keep policy tight for longer, said Pavel Bandilov, Managing Partner at NEO Ventures, on “In Development” hosted by Antonio Kostadinov.
“I would rather expect another rate hike, or at least rates held at high levels for a longer period. Higher oil prices and rising geopolitical tension will inevitably weigh on central bank decisions. Higher energy costs could speed up inflation again, which would limit the room for easing. If this pressure persists, the Federal Reserve and the other major central banks will have to act more cautiously, even at the cost of weaker growth and more expensive debt service.”
High rates and rising debt leave the Fed with a hard choice
Signals from the US labor market complicate the picture further. If employment and consumption stay resilient, the Fed will have fewer reasons to cut rates quickly. At the same time, more expensive oil could fuel inflation through higher transport and production costs.
“The European Central Bank also raised its three key interest rates by 25 basis points. But fighting inflation comes at a high price - credit becomes more expensive, economic activity slows and servicing public and private debt becomes harder.”
“I don’t claim to be an expert on the level of Scott Bessent, but I will allow myself to question how effective these actions are. Buybacks can temporarily improve liquidity and ease pressure on the bond market, but they do not solve the core problem - the constant build-up of new debt. US government debt is already at levels comparable to the Second World War, and with rates this high, servicing it keeps getting more expensive. If the budget deficit keeps growing, such measures will only postpone the hard decisions and shift the burden onto taxpayers and future generations.”
According to Bandilov, the approaching midterm elections could push spending and political promises even higher.
Investors to AI companies: “Show us the money”
Equity markets are shifting too. After the jump in oil, the main indices turned red and investors became far more selective about companies. Simply being in the AI sector is no longer enough. The new message is: “Show me the money.”
Bandilov noted that Oracle has drawn attention with strong growth in cloud services, while Microsoft keeps investing in infrastructure and looking for ways to monetize its AI products. There is also selective interest in companies such as ServiceNow and Broadcom. South Korea is part of the same trend because of the key role of its chip and memory makers.
“The next stage will probably be about specialized AI tools, working bots and clearly defined product niches. For OpenAI and Anthropic, any slowdown may be seen not as the end of the story, but as a transition to a more mature stage.”
He is clear that markets are entering uncharted territory. In the short term they will react to inflation, oil and central bank decisions. In the long term, however, what will matter is real revenue, fiscal discipline and companies’ ability to turn technology investment into profit.
Watch the full commentary in the video:
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