Last week in bond markets, an unexpected shift in Federal Open Market Committee (FOMC) rate hike projections catalyzed a selloff in shorter-term US bonds, pushing yields higher, while the Federal Reserve left rates unchanged. The one-year treasury yield climbed 0.13% higher to close the week at 3.98%. In contrast, UK government bonds rallied and yields declined after May Consumer Price Index (CPI) inflation came in below expectations. The Bank of England (BoE) kept its interest rate unchanged at 3.75%, as BoE Governor Andrew Bailey highlighted that the recent decline in oil prices has been encouraging but emphasized the need for more data. The decision was viewed by investors as an active rate hold, implying a conscious decision to maintain rates while closely monitoring inflation and remaining ready to act if necessary. 

The Federal Reserve (Fed) voted to leave rates unchanged—the first meeting under the new Chair Kevin Warsh, who highlighted a continued commitment to deliver price stability. Additionally, Fed officials characterized inflation as elevated relative to its 2% target, largely attributed to supply shocks and rising global energy prices linked to the Iran war. Despite the widely anticipated rate hold decision, investor attention pivoted to revised FOMC rate projections for 2026. Notably, while no Fed officials projected a rate hike at the last March meeting, nine officials now expect at least one rate hike for the remainder of the year. This pivot triggered an abrupt selloff in shorter-term US bonds, as investors re-priced rate hike expectations and yields rose. Reflecting this, overnight swap market data suggested a nearly 50% probability for a 0.25% rate hike in the US as soon as September, up from 20% the week prior. 

In corporate bond news, Nvidia executed a US$25 billion, seven-part offering—marking its first investment-grade bond issuance since June 2021, when the company raised US$5 billion. The newly issued investment-grade bonds, rated AA by S&P, featured maturities ranging from two to 30 years with fixed coupons between 4.25% and 5.625%. The proceeds were intended for general corporate purposes, including the repayment and refinancing of outstanding debt. According to Bloomberg, the longest-dated bond was priced to yield approximately 5.628%, representing a tight spread of roughly 0.65% above the risk-free US government benchmark. This pricing underscores historically low corporate risk premiums and reflects Nvidia’s high-grade credit status, which allowed them to secure competitive financing rates. The offer was significantly oversubscribed with approximately US$85 billion in orders according to Bloomberg, reflecting strong investor demand. Nvidia plays a pivotal role as a key supplier of chips amidst large-scale AI data center buildouts. A number of large technology companies continue to raise capital for-AI related growth through bond issues and other means. This offering is another example of an oversubscribed bond issue by hyperscalers, such as Amazon, Alphabet and Meta.