US Long-Term Interest Rates Rise Again… Is Treasury’s Bond Buying Futile?

Despite an unusual measure by US Treasury Secretary Besant to purchase government bonds, long-term market interest rates rose again within a day. This indicates a decline in market participants' confidence in the Treasury.

The recurrence of a pattern where interest rates rebounded after the release of employment figures, Consumer Price Index (CPI), and Producer Price Index (PPI) is adding to market uncertainty. Director Park Myeong-seok stated, "Secretary Besant made such a significant decision, acting in a way he typically doesn't, but for interest rates to rise again within a day, that sends a pretty strong message."

News has emerged that AI company Anthropic is preparing for an initial public offering (IPO) sooner than initially expected. Director Park Myeong-seok stated that Anthropic might accelerate its IPO schedule, initially anticipated for October, and file its application within this month.

This news of an early IPO reflects high market interest in the AI industry as a whole and could positively influence related investment sentiment.

Three key events are scheduled for next week that will gauge the market's direction. First, the earnings release of Nvidia, a leader in the artificial intelligence (AI) semiconductor market. Nvidia's earnings are expected to significantly impact the overall AI industry and technology stock investment sentiment.

Second, the release of the Personal Consumption Expenditures (PCE) price index. PCE is the Federal Reserve's preferred inflation gauge and provides important clues for predicting the direction of the Fed's monetary policy.

Third, the Jackson Hole Meeting. This conference, where central bank governors and economists from around the world gather, will provide important signals about future monetary policy through remarks from the Fed Chair, drawing significant market attention. Director Park Myeong-seok emphasized, "Next week is huge. Nvidia's earnings release is coming. Yes. Next week we have Nvidia, PCE, and Jackson Hole. There are three incredibly big events."

Conflicting views on monetary policy are emerging within the Federal Reserve (Fed). Governor Mester is keeping the option of interest rate hikes open, which is interpreted as a preemptive measure to prevent needing stronger actions later.

Conversely, Governor Daly assessed the current monetary policy stance as appropriate and declined to comment on the Treasury's actions.

Such disagreements among Fed governors are contributing to uncertainty about the future direction of monetary policy. Director Park Myeong-seok explained, "Governor Mester will approach it with an open mind. What this means is that raising interest rates now could prevent the need for stronger actions later, implying an openness to rate hikes. Conversely, Governor Daly still believes the monetary policy stance is appropriate."

Treasury Secretary Besant assessed that current Treasury yields are too detached from economic fundamentals and that the market is excessively ahead of itself. He expressed his intention to intervene directly to calm this market overheating.

While some raised concerns that such Treasury intervention could undermine the Fed's independence, Secretary Besant dismissed this, stating it was unrelated to the Fed's independence. Director Park Myeong-seok stated, "Secretary Besant believes the current Treasury yields are too disparate from fundamentals. The market seems too far ahead. Therefore, he intends to step in and address it, essentially saying he will lead the charge."

Treasury Secretary Besant pointed out that market participants are reacting overly sensitively and misunderstanding Treasury yields. The host conveyed Secretary Besant's remarks: "People are too mistaken. It seems like there's nothing much to do in August. Everyone is paying too much attention to Treasury yields and talking about them."

He acknowledged that the market's overreaction makes it impossible not to focus on interest rate volatility in the macroeconomic environment of the second half of the year, yet maintained that the interpretation is excessive. However, New York stocks fell after the Secretary's remarks, reaffirming that market concerns remain significant.

Former US President Donald Trump's remarks about the strongest sanctions and economic isolation policy against Iran in history are putting upward pressure on oil prices. The host quoted former President Trump's statement, "I will collapse this regime with the strongest sanctions and organized economic isolation in history," explaining that while a full-scale war is unlikely, strong economic sanctions have been foreshadowed.

These remarks are escalating geopolitical tensions in the Middle East and pushing oil prices towards the upper end of their previous high-box range. This adds uncertainty to the energy market and could fuel inflation concerns.

Polymarket, an overseas betting site, has been blocked in Korea. The host emphasized that using overseas betting sites is illegal under Korean law and warned that attempting to bypass the block could also lead to legal issues.

This measure aims to warn Korean investors about the potential risks that may arise from using platforms that do not comply with overseas regulations.

The NIMBY (Not In My Backyard) phenomenon regarding data center construction is intensifying in local communities across the US. The host mentioned, "Regarding data centers, NIMBY phenomena are actually occurring. Over 70%. Bipartisan, meaning regardless of which party they support," explaining that concerns over surging local electricity prices due to increased power demand are leading to bipartisan opposition.

This backlash is making it difficult to secure sites necessary for data center construction and could ultimately act as a negative variable for the long-term growth momentum of artificial intelligence (AI)-related companies in the stock market.

According to past statistics, the market typically enters a bottoming-out phase until mid-October, with increased volatility. The host stated, "Historically, this is typically the period where a bottom is formed, and from late October onwards, it slowly starts to find its footing and rise," analyzing that the market could gradually bottom out and transition to an upward trend from late October.

However, various complex factors, including supply and demand variables, are currently influencing the market, making it impossible to rule out a different pattern than historical statistics. Particularly, since there have been structural changes in the market following the introduction of artificial intelligence (AI) technology, it is important to note that past patterns may not be repeated.

There are two key points investors should watch in the upcoming Nvidia earnings release. First, whether the company can maintain its 75% operating profit margin. The host stated, "Basically, remember this 75% margin. It's a number, easy to remember. Can they continue to maintain a 75% margin? I think that will be an important thing to watch," explaining that maintaining a high margin will be a crucial indicator of Nvidia's profitability.

Second, whether it can continue solid growth while reducing its dependence on the Chinese market. As uncertainty in the Chinese market grows amid US-China technological rivalry, a key evaluation factor will be how effectively Nvidia responds to these external factors and secures new growth drivers.

US investors still tend to view the memory semiconductor industry as cyclical, lacking confidence in long-term contracts or sustained profitability. The host pointed out, "The US still doesn't believe that. They don't believe in long-term contracts or the possibility of sustained profitability over the long term. The stereotype that 'they're all cyclical industries' is deeply ingrained."

For memory semiconductor companies to undergo a stock revaluation, they will need to clearly demonstrate sustained operating profit for at least one to two quarters. Furthermore, actively pursuing shareholder return policies can also serve as an important part of building corporate trust and breaking investor stereotypes.

With the worsening interest rate issues in the market, analysis suggests that the semiconductor industry cannot escape its pressure. Interest rate hikes directly impact the cash-generating ability of big tech companies, which can indirectly affect semiconductor demand.

Furthermore, concerns are raised that increased financing costs and reduced bond issuance capacity for big tech companies will lead to a slowdown in new investments, ultimately negatively impacting the overall semiconductor industry.

Following an investigation into allegations of misconduct involving a former employee, Super Micro Computer's executives were found to have had no knowledge of the actions, clarifying that it was not a company-wide issue. The host explained, "The investigation results showed that the executives were completely unaware of the actions taken by this former employee. They drew a line, stating it was not a company-wide problem."

As a result of this uncertainty being resolved, Super Micro Computer's stock price rebounded. This served as an opportunity to restore market confidence in the company's integrity.

CrowdStrike's stock price temporarily declined after news that its Chief Technology Officer (CTO) resigned to establish an AI cyber fund. The host mentioned, "CrowdStrike's stock price fell again today, with the CTO resigning to create an AI cyber fund." This case illustrates the short-term market impact that significant internal personnel changes can have on a company.

Walmart's stock price plummeted by approximately 10%, marking its largest drop in four years. This was primarily attributed to a significant decline in growth rates at existing US stores. The host explained, "Walmart reportedly saw its biggest drop in about four years, a plunge of about 10%. Looking at it, the decline was justified. The growth rate of existing stores in the US has fallen significantly recently."

Despite this growth slowdown, Walmart's efforts to enhance efficiency and improve customer experience through the adoption of artificial intelligence (AI) technology and the use of robotic employee Sparky are being positively evaluated. It remains to be seen whether AI-driven cost savings and productivity improvements will create opportunities for future earnings rebound.