After a brief holiday, the U.S. bond market resumed trading, with long-end Treasury prices edging higher. The turmoil surrounding NVIDIA (NVDA.US) has raised doubts about the AI trade narrative, prompting safe-haven buying into Treasuries. The 30-year Treasury yield fell 2 basis points to 5.34%, with an auction of the same maturity scheduled for Thursday; the 10-year Treasury yield briefly dipped before stabilizing at 4.99%. Wednesday was U.S. Veterans Day, and the cash Treasury market was closed. Earlier reports said the NVIDIA board is considering removing CEO Huang Renxun, with allegations pointing to multiple extramarital affairs, shaking market risk appetite. This chip giant is the core pillar of the AI rally, and any negative turmoil could damage market confidence far beyond the company itself.
Commonwealth Bank of Australia strategist Carol Kong said: "The series of news surrounding Huang Renxun has further shaken market confidence in the AI narrative, driving a small safe-haven bid in Treasuries. NVIDIA is crucial to the AI investment boom and even the global economy, and without a doubt, all market participants are closely watching how events unfold." Other sovereign bonds in the Asian session also drew buying, with Australian and New Zealand government bond yields falling at least 1 basis point. Strategist Mark Cranfield said: "Aggressive traders will likely see the slight rebound in the Nasdaq as a window to rebuild macro hedge positions. That could also revive bond buying—Treasuries have been under pressure and weakening all week."
However, short-end Treasury yields edged higher as traders continued to bet the Federal Reserve will raise rates further, causing the Treasury yield curve to flatten. The 2-year Treasury yield rose 3 basis points to 4.77%, and the 5-year yield rose 1 basis point to 4.83%. Swaps market pricing shows that after the key U.S. consumer price indicator for October came in stronger than expected again, traders are pricing in a 25 basis point rate hike at the Fed's December meeting. The data prompted Fed officials to open the door to more aggressive rate hikes in the coming months, with Governor Christopher Waller saying a 50 basis point hike may be needed in December. Andrew Ticehurst, senior rates strategist at Nomura Holdings in Sydney, said: "The rise in U.S. short-end yields this morning is essentially the market continuing to reprice a hawkish Fed policy after the blowout inflation data, combined with several officials' blunt hawkish remarks afterward. Current market pricing for a December hike is already close to 30 basis points, indicating the market is seriously assessing the risk of a 50 basis point hike in December, and that signal is worth watching."
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