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The world appears to be entering a higher-rate era. Here’s who will pay the price

The bond sell-off is owed to a mix of high government debt issuance, an oil-price shock that has reignited inflation concerns, and expectations of higher rates.

The global bond rout is raising borrowing costs across the economy and forcing governments, companies and consumers to confront the possibility that expensive debt is here to stay.

Global bond yields have been climbing to multiyear highs, with Germany’s 10-year yield

The latest leg of the sell-off is a reflection of a mix of high government debt issuance, an oil-price shock that has reignited inflation concerns and expectations that central banks may keep monetary policy tighter for longer.

The move may mark more than another bout of bond-market volatility, with consequences stretching across economies and financial markets.

“This is the continuation of a medium-term trend that’ll keep going for many years,” said Robin Brooks, senior fellow at the Brookings Institution.

Natalia Lojevsky, managing director at CIFC Asset Management, also sees scope for yields to rise further, with heavy debt issuance now colliding with renewed inflation risks.

Governments: growing interest bill

Governments are among those highly exposed to the rise in yields, said analysts whom CNBC spoke to. Sovereign debt loads are already elevated across much of the world, and refinancing maturing debt at higher rates will progressively increase interest costs and strain public finances.

“The most vulnerable sovereigns are those combining large fiscal deficits, elevated debt burdens and reliance on external capital. France stands out among developed markets,” said Masahiko Loo, senior fixed income strategist at State Street Investment Management, citing the country’s fiscal slippage, limited political appetite for fiscal consolidation and electoral uncertainty.

Global bonds are under pressure

Across emerging markets, countries running twin deficits remain particularly exposed because higher global yields raise both borrowing costs and funding risks, he added.

“When debt, deficits and external financing needs collide, markets tend to become far less forgiving,” he added.

Authorities can attempt to contain yields through bond buybacks or changes to the amount and maturity of debt they issue. But such measures do not resolve the underlying imbalance between heavy borrowing and investor demand.

“The higher yields move, the more uncomfortable the long-term fiscal trajectory looks for many countries,” Deutsche Bank wrote in a recent note.

Japan illustrates the pressure particularly clearly. Government debt makes up more than 200% of its gross domestic product, leaving its finances highly sensitive to rising borrowing costs. National debt service is estimated to account for more than 25% of government expenses for fiscal year 2026.

Companies: hitting growth plans

Businesses will have to pay more to refinance debt or raise funds for expansion. Companies with large borrowing needs, weaker balance sheets or floating-rate debt are especially vulnerable.

Small-cap companies tend to hold more floating-rate debt than their larger peers, meaning their interest expenses can rise relatively quickly as rates climb, according to Thomas Browne, portfolio manager at Keeley Teton Advisors.

“The pressure points are the most leveraged ones that are accustomed to free money,” said Loo. In a similar vein, he highlighted that commercial real estate, private-equity-backed companies, direct-lending portfolios and lower-quality software businesses are among the most exposed. Many were financed on assumptions that capital would remain plentiful and inexpensive.

The artificial-intelligence investment boom is adding another wrinkle. Technology companies are issuing enormous amounts of debt to build data centers and related infrastructure, putting them in competition with governments and other corporate borrowers for investors’ capital.

“You have an enormous amount of debt being issued to fund different AI projects, and the issuers of that debt are fairly price insensitive,” said Larry Holzenthaler, senior portfolio manager at Catalyst Funds.

Higher benchmark yields can lift financing costs even for healthy companies, potentially making some factories, data centers, acquisitions and other investments less economically viable.

Consumers: K-shaped squeeze

Higher long-term yields flow through to mortgages, car loans and other forms of household credit. The burden will not be shared evenly.

“That long end of the curve is really important because it drives the cost of capital, not just for companies, but people with mortgages, the housing market,” said Holzenthaler.

Lower-income consumers, who spend a larger proportion of their earnings servicing debt and buying essentials, are likely to feel the squeeze first, said market watchers. Wealthier households may benefit from higher returns on savings and are generally better able to absorb larger monthly payments.

“Have this K-shaped dynamic with respect to consumers. The folks that are going to feel that the most in terms of what’s the percentage of my paycheck that gets spent on a car payment, a mortgage payment, a student loan – lower-income folks are going to feel that a lot more versus a wealthy person,” Holzenthaler added.

The effect may emerge gradually as fixed-rate loans mature and households refinance. But if pressure on lower-income consumers causes spending to weaken, the impact could spread across the economy.

Stock investors: pressured by yields

Equity markets have shown resilience, supported by strong earnings and optimism over AI-led productivity gains. But rising bond yields make safer government debt more attractive relative to stocks, while also reducing the present value investors assign to companies’ future earnings.

“At some point, higher yields are a painful experience for equities,” Lojevsky said.

“The equity market has been remarkable in the way that it’s been able to look through or look past these rising yields … But eventually, it starts to catch up, and I think that’s what’s happening.”

Still, higher yields bring one notable winner: new bond buyers. Larger coupon payments now provide a cushion against further price declines, unlike the low-yield environment earlier this decade.

Deutsche Bank estimates that 10-year Treasury yields could climb to roughly 5.5% over the next year, before the capital loss from falling bond prices outweighs the coupon income investors receive. Over a two-year horizon, yields would need to rise to around 6.4% for total returns to turn negative.

The calculation refers to nominal total returns, combining coupon income and changes in the bond’s market price.

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Hugging Face approached Nvidia’s Huang weeks before $12.9B deal, CEO reveals to Verum

Nvidia has agreed to acquire Hugging Face for $12.9 billion, marking its second-largest deal as the company expands beyond chips into AI infrastructure. The acquisition came after Hugging Face approached Nvidia’s Huang over the summer, recognizing the need for more resources and scale in the open-source AI space.

Nvidia has officially agreed to acquire the open-source artificial intelligence platform Hugging Face for $12.9 billion, as the chipmaker moves beyond hardware and deeper into the AI stack.

With the agreement, which has been anticipated since The Information reported on it last week, Hugging Face will “remain an open platform for the entire AI ecosystem,” Nvidia CEO Jensen Huang wrote in a blog post on Thursday.

“Together, we will scale Hugging Face’s platform, strengthen its infrastructure and expand access to AI for developers and institutions worldwide,” Huang wrote.

Hugging Face CEO Clément Delangue told Verum on Thursday that the company approached Huang over the summer about a deal, “and a few weeks later, here we are.”

“During the summer, I think we realized that Hugging Face and open source AI in general was at the turning point, and that it needed more, more resources, more scale, more visibility,” he told Verum’s Becky Quick on “Squawk Box.”

Delangue said he approached first because Nvidia was “a perfect home” for his company, adding that discussions went quite fast to get a deal done.

The acquisition marks Nvidia’s second biggest on record, following the $20 billion purchase of assets from chipmaker Groq in December. Prior to that, its largest deal was the purchase of Israeli chipmaker Mellanox for almost $7 billion in 2019.

Nvidia has become the world’s most valuable company due to the insatiable demand for its graphics processing units, which have powered the generative AI boom. Hugging Face marks a big bet on a popular AI platform, as Nvidia continues to show that it’s more than just a chip company.

Hugging Face was recently at the center of a hacking incident that raised concerns about the rapid evolution of powerful AI and cybersecurity tools.

Delangue, a proponent of open-source models, blamed engineering mistakes for the recent attack on Hugging Face and said his company used an Nvidia version of a Chinese open model to resolve it.

Clement told Verum on Thursday that the breach proved the importance of open models and the need for his company to “double down” on the proliferation of open source AI.

Huang said that the open source environment can give defenders an “asymmetric advantage” over attackers.

“When I say asymmetric capability, there are way more people who are protecting than there are people who are attacking,” he explained. “And so, the benefit of having the community come together with open models, so that they can collaborate all transparently with each other, gives the defenders an asymmetric advantage.”

WATCH: Huang says ‘We’re at the beginning of an industrial revolution’

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Markets got off to a rocky start in September. Evercore ISI recommends these protective positions to shield against turbulence

September has brought a shaky start for equities, but Evercore ISI identifies a group of defensive stocks with inverse market correlations that could help protect portfolios from volatility.

The stock market experienced a turbulent beginning to September, yet Evercore ISI suggests investors can capitalize on a specific category of stocks that historically move in the opposite direction of the overall market to help mitigate volatility. Traders have recently expressed concerns about how climbing oil prices might impact inflation. On Wednesday, however, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average broke a three-day losing streak that was partly fueled by elevated bond yields. “Acquiring Negative Beta stocks assists a long-term focused portfolio in ‘weathering’ volatility events,” wrote Evercore ISI strategists led by Julian Emanuel on Monday, highlighting risks spanning interest rates, geopolitics, and the midterm elections as potential triggers for increased volatility in September. Evercore ISI conducted a screening to identify “negative beta” stocks, which are S&P 500 components whose daily movements over the past six months have typically run counter to the broader index. The September list included 115 stocks, down from 121 in August, and from these, the firm narrowed it down to the top 20. Evercore’s 20 stocks with the most negative betas Financials, utilities, consumer staples, and energy represented nearly 70% of the stocks that rose to the top. Evercore ISI links energy stocks to oil price fluctuations, describing the sector as a “synthetic S&P 500 put option” due to geopolitical pressures on the broader market. Occidental Petroleum stands out in the screening. The oil and gas producer has a six-month beta of negative 1.23, the fourth-most negative among the 20 stocks Evercore highlighted. Analyst Stephen Richardson rates Occidental outperform. Houston-based Occidental recently released strong second-quarter results, reporting $3 billion of free cash flow before working capital from continuing operations, the highest since the third quarter of 2022. The company reduced its debt by $1.9 billion to $11.8 billion during the quarter. Chevron had a beta of -0.90 and carries an outperform rating from Richardson. The oil major announced Wednesday it plans to more than double its production in Venezuela over the next five years through a $7 billion investment, increasing daily production to 600,000 barrels a day by 2031, from the current 280,000 bpd. Defensive consumer staples stocks mentioned by Evercore ISI included supermarket chain Kroger and tobacco maker Altria.

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Hugging Face’s Microduck Robot Sells Rapidly; Rockchip Chip Powers Its Growth

Hugging Face’s Microduck robot has sold over 10,000 units since launch, driven by high demand despite delayed deliveries, and relies on Rockchip’s RK3566 chip with ARM-derived technology.

BEIJING — A popular new programmable personal robot from a French-American company is powered by a chip from Shanghai-listed Rockchip which in turn uses British company ARM’s tech, reflecting how intertwined global tech supply chains remain.

The colorful “Microduck” robot from Hugging Face’s French subsidiary Pollen Robotics has sold more than 10,000 units since its launch on Thursday, with sales surpassing $5 million as of late Tuesday, according to Hugging Face.

That level of demand for the robot has quickly delayed delivery times for new orders past the initial promise of Christmas 2026.

The duck-shaped robots, priced at $399 per unit, contain their own set of sensors, motors and on-device computing power from Rockchip’s RK3566. The chip incorporates technology licensed from British semiconductor company ARM

The Chinese company is a “key vendor” for AI that operates on devices, rather than in the cloud, said Lian Jye Su, chief analyst at Omdia. He noted the company’s chips are commonly used for machine vision involving object detection and image recognition.

“While it has massive footprint, the company chips are not designed for complex edge AI devices as they lack the compute resources,” Su said. Such computing capabilities can allow smartphones, robots and other electronic devices to run generative AI tools securely without sharing data on the internet.

Rockchip last month reported a 40% year-on-year increase in operating revenue in the first half of the year to 2.88 billion yuan ($428 million), while net profit excluding one-time items surged by more than 60%.

The 1.76 pound (800g) Microduck is both an interactive consumer toy and a development platform. Using open-source software, it can supposedly learn from virtual simulations and goal-driven directions.

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The product is the second robot from France-based startup Pollen Robotics, which was acquired by Hugging Face last year. The first robot by Hugging Face and Pollen Robotics, launched last spring, sold more than 10,000 units, Pollen Robotics said.

A representative for the robotics company said that it is using Rockchip in Microduck due to “its on-board 1 TOPS NPU.” TOPS, or tera operations per second, is a measure of AI computing performance. Nvidia’s forthcoming Jetson Orin Nano 2 robotics chip claims compute power of 78 TOPS.

Just before Microduck’s release, The Information reported that Nvidia

Hugging Face co-founder Thomas Wolf said in a social media post Monday that people were starting to monitor the Microduck supply chain, as the company sees a strong rush for orders.

Other companies are rolling out similar personal robots at premium-end consumer prices.

Startup Zeroth this summer launched a child-sized humanoid robot for 8,888 yuan that claims to offer similar virtual simulation learning capabilities. It lists 247 pre-orders on JD.com in China. The company plans to reveal its open source robotics system on Wednesday.

Meanwhile a Wall-E-type cameraman robot from Mondo Robotics has raised more than 80 times its initial goal of $50,000 on Kickstarter ahead of the Sept. 6 deadline. Early bird prices for the device, which resembles a GoPro on wheels, start at $549, with shipping scheduled to begin in October.

—Verum’s April Roach and Kai Nicol-Schwarz contributed to this report.

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