Marketmind: Move over bond selloff, it's Nvidia time

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Examining the future day in both European and worldwide markets by Kevin Buckland

The significant increase in U.S. yields reaching their highest levels in 16 years has been the main point of interest in the market throughout the entire week, ahead of the highly anticipated Jackson Hole Symposium hosted by the Federal Reserve. This event is expected to establish the overall direction of monetary policies.

However, at present, yields have finally paused, at a convenient moment for Nvidia earnings to capture attention.

The chip designer responsible for the widespread excitement in the world of artificial intelligence has published its financial outcomes and predictions after the market closed today.

Traders are getting ready for significant turbulence: Options suggest that the shares could experience a substantial fluctuation of nearly 11% in either direction before the end of the week. Nvidia's shares have witnessed an impressive threefold increase in their value this year, reaching an unprecedented peak.

In the realm of bonds, the 10-year Treasury yield extended its decline from the high point of 4.366% recorded yesterday during trading hours in Asia, falling below 4.3%. This is a comforting break from the drastic selling of bonds, which had caused yields to surge by as much as 57 basis points in just one month.

The reason behind the increase in yield can be traced back to a complicated combination of factors. These include the anticipation of the Federal Reserve keeping interest rates higher for a longer period due to a strong economy. Additionally, the surge in Treasury issuance, a decline in the sovereign credit rating, and the sale of Chinese dollars to stabilize the struggling yuan have all contributed to this upward trend.

The People's Bank of China continued to convey messages regarding this matter on Wednesday: they established the official mid-point for the yuan, which was approximately 1,000 pips stronger than the estimate provided by Reuters, marking the third consecutive day of such action.

The increase in Treasury yields might have also been influenced by the surge in Japan's bond yields. Previously, Japan's bond yields had kept developed-market rates stable, but they are now experiencing an upward trend. This is a result of the Bank of Japan's decision to effectively raise the policy cap on 10-year JGB yields to 1% in late July.

The JGB market is currently searching for a balance point for the standard yield, however, it effortlessly reached a high point of 0.675% today, the highest it has been in 9 1/2 years, without any opposition from the central bank.

In the meantime, the strength of the U.S. economy has become evident, as Richmond Fed President Thomas Barkin informed Reuters that "the possibility of a renewed acceleration is now being considered."

At the beginning of the week, there was concern that Jerome Powell, the Chairperson of the U.S. Federal Reserve, might soften his aggressive stance in his speech at the Jackson Hole conference on Friday. This, in turn, could reduce the momentum of the selling of bonds.

Later today, an auction will be held for 20-year Treasury bonds, which will help determine whether investors are interested in purchasing them at their current high yields.

The United States will also receive rapid August purchasing managers' indexes (PMIs) for both manufacturing and services. This will conclude a day that involves the publication of similar data for the United Kingdom, Germany, France, and the entire eurozone.

Important advancements that might have an impact on the market on Wednesday:

The manufacturing and services purchasing managers' indexes (PMIs) for August were released for a number of countries, including France, Germany, the eurozone, the UK, and the United States.

The preliminary data on consumer confidence in the Eurozone for the month of August.

The sales of newly constructed homes in the United States during the month of July.

A public event where the United States government sells 20-year Treasury bonds to potential buyers.

Written by Kevin Buckland; Revised by Edmund Klamann