The global economy is facing an unusual shortage. Governments, energy companies and technology groups have no shortage of projects, but they have fewer opportunities to finance them at an acceptable cost. Power plants, grids, data centres, factories and transport infrastructure require trillions of dollars. At the same time, governments must refinance debt accumulated during the era of low interest rates while funding defence, healthcare and ageing populations.
The constraint is not a lack of ideas or even a literal shortage of money. It is the rising price of long-term capital. By mid-August, 30-year government bond yields were around 5.3% in the United States, 5.8% in the United Kingdom, 4.9% in France, 3.7% in Germany and 4.1% in Japan. In several markets, these levels were at or near multi-decade highs.
Long-Term Capital Has Become Scarcer
Central banks influence short-term borrowing costs, but 10-, 20- and 30-year yields depend on expected inflation, future borrowing needs, fiscal credibility and the premium required to lock up capital for decades. This is why lower policy rates do not automatically mean cheaper long-term financing.
Governments are issuing more debt to finance deficits and refinance existing obligations. Companies are raising capital for data centres, energy infrastructure and industrial expansion. Investors, meanwhile, want higher compensation for inflation risk, fiscal uncertainty and the possibility of even greater bond issuance.
Oil adds another layer of uncertainty. A move above $90 per barrel increases the risk that inflation remains higher for longer. Yet energy prices are only part of the story. The deeper issue is that several major sectors are competing for capital at the same time.
Governments, Energy and AI Are Competing for the Same Money
Combined government and corporate borrowing in bond markets could reach $29 trillion in 2026, around $4 trillion more than in 2024. Gross government borrowing across OECD economies alone could approach $18 trillion.
A large share is needed simply to replace maturing debt. Around one-third of fixed-rate OECD government bonds outstanding at the end of 2025 are due to mature between 2026 and 2028. New 10-year borrowing costs in recent years have been roughly two percentage points higher than those on the debt being replaced. Cheap legacy debt is therefore being replaced with more expensive financing.
Energy is another major claimant. Global energy investment is expected to reach $3.4 trillion in 2026. Roughly $2.2 trillion could go to power grids, storage, nuclear energy, renewables, efficiency and electrification, while another $1.2 trillion may be directed to oil, gas and coal.
Technology adds a third source of pressure. Capital expenditure by the largest technology companies exceeded $400 billion in 2025 and could rise by about 75% in 2026. AI infrastructure requires more than chips and servers. It also needs power generation, transmission networks, cooling systems and communications infrastructure.
Refinancing Is Where the Pressure Becomes Visible
Higher yields do not hit the economy all at once because much public and corporate debt carries fixed rates. The impact appears gradually as obligations mature and must be refinanced.
For governments, every new bond issued at a higher yield raises future interest costs. Across OECD economies, interest expenditure has already approached 3.3% of GDP. More spending on debt service means less fiscal room for infrastructure, education, defence and social programmes.
Companies face the same trade-off. Strong businesses can reduce less important investments. Highly leveraged companies may need to sell assets, issue equity or accept financing that absorbs a larger share of future profits. Long-duration projects are especially exposed because revenues may not arrive for 10 or 20 years.
A New Hierarchy of Investment
Expensive capital does not stop investment. It changes which projects come first. Businesses with predictable revenue, faster payback periods, strong cash reserves and low debt are better positioned. Projects dependent on distant profits or continuous access to cheap capital face greater pressure.
Three broad scenarios follow. Yields could gradually decline if inflation eases and governments improve fiscal credibility. They could remain high if deficits persist and bond supply keeps growing. Or confidence in the debt sustainability of individual governments could weaken and trigger sharply tighter financial conditions.
The prolonged period of expensive capital appears the most likely scenario. Governments are unlikely to abandon spending on security, healthcare and demographic support. Technology companies do not want to fall behind in AI. Energy systems need investment regardless of the business cycle.
The global economy is therefore entering an era of forced choice. The key question is no longer whether a project is strategically important. It is whether its expected return can justify the cost of long-term capital. That distinction will shape investment, competitiveness and growth for years to come.