Above the Fold              

The 10-Year Yield Touches a Critical Level 

On Wednesday, just before the Bank of England announced an emergency bond-buying program, the yield on 10-year U.S. government bonds traded briefly above 4% for the first time in more than 10 years. As bond-selling pressure continues here in the states, yields have been climbing at their fastest pace in more than 40 years, mainly due to the aggressive rate hike trajectory delivered by the Federal Reserve (Fed). Yields on the 10-year note were up nearly 2.5% year to date, the sharpest increase since 1981.  

Fears of an “over-correction” by the Fed have also sent yields on the 2-year Treasury note soaring faster and higher, with that short-term benchmark trading over 4.15%. This inversion, where short-term rates are higher than longer-term rates, typically signifies a wide-reaching expectation of recession or at least economic weakness following a period of rising interest rates. Despite these outsized moves and unfortunately for consumers and borrowers, rates are likely to continue even higher as the Fed is laser-focused on bringing inflation down to its target of 2%. Shorter-term treasury yields are mainly priced by investors’ predictions for what overnight interest rates set by the Fed will be over the life of a particular bond; obviously, supply, demand and any central bank intervention can also impact bond prices and yields. 

Three Things              

Bank of England Steps Into Bond Market to Quell Panic Selling 

After an unprecedented tax-cut announcement by the U.K., investors reacted by dumping U.K. government bonds, sending borrowing costs (interest rates) soaring. The yield on the 10-year U.K. gilt eclipsed 5%, endangering the stability of a normally calm, low volatility marketplace. In response, the Bank of England announced it would purchase government bonds with long maturities “on whatever scale is necessary,” in an effort to quell market gyrations and hopefully stop what could become a systematic crisis. Yields on the 10-year gilt dropped down to 4%, but there could be more volatility to come.   

Intel Appeals to Gamers to Get Its Groove Back 

The legacy chipmaker just announced a new series of game-focused graphics chips to challenge rivals such as AMD and Nvidia, who together dominate the videogame graphics hardware market. The new Arc series of graphics processors (GPUs) are aggressively priced, starting at $329 in an effort to capture budget-minded consumers, but high-end models range all the way up to $1,600. Though global economic conditions have cooled the GPU market, Nvidia and AMD netted around $2 billion and $1.7 billion, respectively, in the last quarter alone. If Intel can capture just a moderate piece of the market, it could be a big win for the company. 

Your T-Shirts May Be Getting Cheaper 

Inflation pressures continue to ebb across the commodities space, with the softest of “soft” commodities, cotton, being the latest to see prices decline sharply. Since dropping to 50 cents a pound in 2020, cotton prices had nearly tripled close to $1.50 earlier this year. And despite a drought in the U.S. that’s expected to reduce this year’s harvest by 40%, cotton prices have plummeted nearly 25% since last month alone and are down roughly 40% from May highs. Global economic weakness and a soaring U.S. dollar are both contributing to the welcomed decline in prices.  

In the Know              

A Little Video Card (GPU) History 

International Business Machines (IBM) was the first to develop video cards back in 1981. They had two versions, the MDA (or Monochrome Display Adaptor) with 4KB (kilo bytes) of memory and CGA (Color Graphics Adapter) with 16KB of memory. These were really basic systems that allowed users to see simple letters and shapes (think Atari). 

It wasn’t until 1987 that the VGA (Video Graphics Array) standard was rolled out, giving users an amazing (for the time) 640 x 480 resolution, using 16 colors and 256KB standard. This was the era of the Nintendo Entertainment System. Over the years, more players entered the space, with Nvidia jumping strong into the game in 1999 with their GeForce 256 GPU. ATI, which was acquired by AMD in 2006, launched its venerable Radeon R100 card in 2000.  

Today, graphics cards are often the heart and most expensive element of a computer, with some cards, like the Nvidia Quadro RTX A6000 costing upwards of $5,000, offering 48 GB (gigabytes) of memory, 384-bit resolution with 4091 x 2160 pixels that display millions of colors. The latest GPUs are literally thousands of times more powerful than the first video cards.