Trading Day: Blue Monday

By Jamie McGeever

ORLANDO, Florida, Sept 28 (Reuters) - The global bond slump accelerated on Monday, pushing yields to new, multi-decade highs, as oil prices rallied after US President Donald Trump rejected a peace proposal from Iran. Stock markets duly fell, although news that the two sides are set to hold separate talks with mediators eased the selling pressure across asset classes.

In my column today, I examine whether the US can grow its way out of its debt crisis. Treasury Secretary Scott Bessent is hoping AI-driven growth and productivity will save the day, but a repeat of the 1990s, when the internet boom boosted tax receipts and shrank the deficit, is unlikely.

Today's Key Reads

• Nvidia boosts share buyback by record $150 billion as AI boom fuels growth

• China, US agree to tariff cuts on $60 billion of goods including agriculture, household items

• China's industrial profit growth slows further as economic imbalances deepen

• Prediction markets' push into US stocks raises regulatory alarm bells

• The political chess behind the ECB's next leadership shake-up

• Today's Key Market Moves STOCKS: South Korea -2.7%, China -2% to lowest since Aug last year. Europe and UK little-changed. Dow -0.7%, S&P 500 -0.8%, Nasdaq -0.9%.SECTORS/SHARES: Eight sectors on the S&P 500 fall, three rise. Comms services -1.7%, consumer staples +0.4%. Boeing -7%, Qualcomm -7%, Intel -6%. Palo Alto Networks +5%, Paramount Skydance +3%.FX: Dollar edges up. Colombian peso -2.5%, Mexican peso -2%.BONDS: The selloff continues. French, German, UK, US benchmark 10-year yields all highest since mid-late 2000s. US curves eventually end a touch flatter.COMMODITIES/METALS: Oil rises, Brent +1%. Gold -3.5% to 7-week low.

Today's Talking Points:

AI debt cracks appear

US corporate debt markets have been remarkably resilient in the face of soaring Treasury yields and growing concern over AI data center buildout costs. Until now. Cracks are beginning to appear — high-yield spreads broke out on Friday to the widest since April and are approaching 300 basis points, but investment-grade spreads are finally starting to move too. They ended last week at 81 bps, and on Monday likely hit the widest since April.

Oracle's debt issues are nothing new, but the blowout in the company's borrowing costs and CDS rates is still remarkable. Meta's bond yields and CDS are also breaking sharply higher. Hyperscalers' bond issuance this year is around $220 billion, and could double next year. It will come at a price, though. An increasingly high price.

Another Nvidia record

Nvidia, the world's most valuable company, is boosting its share buyback authorization by a record $150 billion. This brings its remaining buyback capacity to $235 billion, which it expects to deploy through fiscal 2028. It's an extraordinary amount of share-price-boosting firepower, even for a $5.5 trillion market cap entity.

Shares bucked the downbeat market on Monday, rising nearly 2%. The buyback move suggests Nvidia thinks its share price should be higher. It's a vote of confidence in the business from the top. As ever with buybacks, however, there's always the nagging doubt that they show a lack of better alternatives.

The cold rush

Investors are cooling on gold. The yellow metal fell to its lowest in nearly two months on Monday, its 3.5% fall the steepest since early June. Is a break back below $4,000/oz on the cards? It wouldn't be a surprise - the dollar is rising, the Fed seems to be at the beginning of a tightening cycle, and Treasury yields are soaring. None of that is gold-friendly, and US-Iran detente would also dim gold's safe-haven allure.

But central banks are sure to be big buyers on dips, if their behavior in recent years is any guide. They have steadily added gold to their reserves, and major holder China is leading the way — Beijing bought 650,000 ounces, nearly 20 tons, in August, the most since October 2023.

What could move markets tomorrow?

• Australia interest rate decision

• China 'official' manufacturing PMI (September)

• European Central Bank President Christine Lagarde speaks

• Bank of Canada Governor Tiff Macklem speaks

• US Federal Reserve officials scheduled to speak include Vice Chair for Supervision Michelle Bowman, Governors Michael Barr and Christopher Waller, regional Fed presidents John Williams, Austan Goolsbee, and Alberto Musalem

Want to receive Trading Day in your inbox every weekday morning? Sign up for my newsletter here. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

​

(Reporting by Jamie McGeever)