# Market crash exposes Wall Street's real fear: U.S. debt

> A top economist says last week's stock selloff proved rising Treasury yields reflect fiscal crisis, not AI competition for bond buyers.
- Title: Market crash exposes Wall Street's real fear: U.S. debt
- Summary: A top economist says last week's stock selloff proved rising Treasury yields reflect fiscal crisis, not AI competition for bond buyers.
- Keywords: u.s. debt, treasury yields, robin brooks, brookings institution, federal budget deficit, ai infrastructure, fiscal risk, bond market, Fortune
- Source: Fortune — https://fortune.com/2026/11/08/us-debt-ai-stock-market-selloff-bond-yields-treasury-risk-premium
- Author: Jason Ma
- Read time: 1 min
- Topics: u.s. debt, treasury yields, robin brooks, brookings institution, federal budget deficit, ai infrastructure, fiscal risk, bond market
## Two competing theories on yields
Wall Street has debated why Treasury yields rose so much this year. Some blamed AI companies flooding the bond market with debt. Others pointed to fiscal risk from U.S. government borrowing.
## The 10-year yield's dramatic climb
The 10-year Treasury yield shot up more than 100 basis points, soaring above 5% and at one point hitting the highest level in 24 years before easing in recent weeks.
## What drove yields higher
The Iran war started in late February, sending oil prices up and raising inflation expectations. Simultaneously, hyperscalers flooded the bond market with debt to finance AI infrastructure, keeping the economy hot.
## Robin Brooks's natural experiment
Robin Brooks, a senior fellow at the Brookings Institution, said last week's market selloff was a natural experiment testing which theory was correct about Treasury yields rising.
## Brooks's fiscal risk argument
Brooks argued that corporate borrowing is nowhere near early two-thousands IT bubble levels, while public borrowing is historically high and more likely driving up yields, not AI debt.

> On one end of the spectrum are people like me who think this is a rising fiscal risk premium as our public debt grows out of control.
## The fiscal crisis evidence
The federal budget deficit widened to one point ninety nine trillion dollars in fiscal twenty twenty six, twelve percent worse than the one point seventy eight trillion gap in fiscal twenty twenty five.
## Interest costs spiral upward
Gross interest costs for fiscal twenty twenty six reached one point thirty six trillion dollars at an average rate of three point fifty three percent, more than double the rate in twenty twenty one.

> Higher interest begets more debt, and greater debt begets higher rates and higher interest. Eventually, the whole thing could come crashing down.
## Key takeaway

Robin Brooks argues the stock market selloff revealed that rising Treasury yields stem from U.S. fiscal risk, not AI debt issuance crowding out government bonds.