Bond yield warning signs and Nvidia’s $100 billion forecast

**Charlene Young** (0:09)
Hi, I'm Charlene Young, and welcome back to the AJ Bell Money & Markets podcast after our summer break. Joining me on the show this week is Tom Sieber. Hi Tom.

**Tom Sieber** (0:20)
Hi Charlene, and hi to everyone who is watching or listening at home. I hope you had a good summer.

**Charlene Young** (0:25)
I did. Thank you. I did. It feels like, I don't know, it's the first of September and the skies are gray and rainy again in Manchester.

**Tom Sieber** (0:35)
I know. Yeah, we operate on a different timeline out here in Scotland. So the kids have been back at school for a few weeks already.

**Charlene Young** (0:43)
Of course, yeah.

**Tom Sieber** (0:45)
Just with a money-saving hat on, we spent the first week of the holes in center parks, but sensibly we picked Nottingham rather than the one in Cumbria. That meant we avoided the peak prices. Although, there were a lot of other Scottish accents there because I think a lot of people were doing the same.

**Charlene Young** (1:02)
The same idea. Oh, well, I don't know. The only dates my husband and I could match for leave were right in the middle of August, not that long ago. So I spent pretty much all of my holiday budget for the entire year on those 12 nights in Crete, which was great, but pretty much the exact opposite of your good savvy spending skills. We were lucky.

**Tom Sieber** (1:22)
We were lucky. I should sort of count the numbers on that one.
So this week, we're going to be talking about last week's crunch earnings from Nvidia. We're going to be talking about why government bond yields are starting to surge again, the change of chair at BP, and how Shein has got off to a pretty sticky start on the stock market.

**Charlene Young** (1:41)
Yeah, I'll be chatting about why the housing market is looking a little shaky and why it's important to check you're getting the pension tax relief you're owed on what you pay in.

**Tom Sieber** (1:51)
We'll also be digging through the capital gains tax data, checking what trends it reveals as receipts have hit record levels.

**Charlene Young** (1:58)
Plus our very own Hannah Williford talks to Rob Perrone from Orbis Investments about the latest developments in the bond market. Before we hear Rob's thoughts though, Tom, could you talk about what has been a very volatile time for markets in general and bond markets in particular?

**Tom Sieber** (2:15)
Yeah, so Rob and Hannah will cover all of this in a lot more depth in the interview that we've got coming up. But just for a bit of context, I think bond yields have been dominating the market discourse for at least the last few weeks, actually coinciding with the period that we've been off. So I don't know, presumably that's purely coincidence, but just as a quick reminder, bonds are IOUs issued by governments, companies, other institutions that pay a fixed rate of income. And then they return the sum that you've effectively lent them at the point at which they mature.
And this big increase in yields and government bonds follows a renewed surge in oil prices, as we've seen the hostilities between the US and Iran ramp up again. There was a period last week where yields had come back down a bit, partly because oil prices had come down, but the vague hopes of some diplomatic progress in the Middle East haven't really amounted to anything. In fact, we've seen a kind of, as I said, we've seen some hostilities pick up again. So that's taken all prices higher, that's seen yields move higher. And then on top of that, we had some comments from the Federal Reserve Chair, Kevin Walsh, at the Jackson Hole Symposium, or it's basically a big get together for central bankers and politicians. And the comments that he made have kind of increased expectations for a rate hike in the US in the short term. So the yield on a bond rises when the price falls. And like most assets, the price is a function of supply and demand. And government bonds are just in less demand thanks to the sheer scale of borrowings. There's a lot of government debt out there. We recently saw the US national debt tick over 40 trillion. Deficits are rising, so that's the shortfall between the amount a country spends and how much it brings in revenue. And as we said, we've got this Middle East crisis and that's increasing concerns about inflation. And when inflation increases, it's bad news for bonds because mostly they offer a fixed rate of return. And the value of that return is then kind of eroded by rising prices. And these factors have been compounded by the fact that central banks are buying less government bonds as well.