U.S. debt is competing with a record supply of corporate bonds, pushing up the cost of federal borrowing just as war spending piles up

The AI capital expenditure boom has created a gusher of corporate debt, forcing the Treasury Department to make its bonds more attractive to investors as the U.S. war on Iran adds to the deficit.

Last Tuesday saw the single busiest day on record for U.S. corporate bond sales as President Donald Trump’s hint that the war may end soon briefly calmed markets and sparked a mad dash for companies to issue fresh debt.

By the end of the day, total investment-grade issuance topped $65 billion...