The Brainchip Holdings Ltd (ASX: BRN) share price is advancing 4.53% on Thursday.
At the time of writing, the share is swapping hands at $1.155 apiece.
Brainchip has caught a bid today on no news. However, each of the S&P/ASX 200 Information Technology Index (ASX: XIJ) and the S&P/ASX All Technology Index (ASX: XTX) are outpacing peers today.
Both sectors are leading the pack today and have gained around 1.17% and 2.04% on the day respectively.
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What's up with the Brainchip share price?
Inflation data has been the main driver of asset returns in 2022. So with the latest US inflation data from July showing a potential slowdown in core prices, risk assets have caught a bid today.
"US consumer prices did not rise in July due to a sharp drop in the cost of gasoline, delivering the first notable sign of relief for…the past two years," Reuters reported.
Technology shares – whose valuation and market pricing are sensitive to government bond yields – advanced today following a sharp pullback in the spectrum of US Treasury yields.
The relationship between Treasury yields and the price of tech stocks is abundantly clear in Brainchip's case, as seen in the chart below looking at these instruments this YTD.
Investors had increasingly been pricing in the prospect of an economic recession in 2022/23 as central banks typically tighten their interest rate policy to combat the surging cost of living.
It does this to achieve price stability, however, it does so at the expense of economic growth in the economy. Each 1% increase in interest rates has an impulse effect downstream in the real economy. It really is a proper balancing act.
Hence, with inflation cooling, investors believe the likelihood of further, aggressive rate hikes is now less and less, which is a net positive for risk assets.
As can be seen, with a pullback in the level of Treasury yields – which look to have peaked in late June – the Brainchip share price has caught a bid, alongside the broad tech sector.
This extends gains to more than 114% for the share over these past 12 months of trade.
