The S&P/ASX 200 Index (ASX: XJO) seems to be on a chocolate high. Since the Easter long weekend, the ASX 200 has gotten a second wind, rising a healthy 1% since last Thursday at the time of writing. But one ASX sector seems to be enjoying the lion’s share of the goodwill on the share market. ASX tech shares have had an exceptional week. Since Thursday afternoon, the S&P/ASX All Technology Index (ASX: XTX) is up 5.7%. It’s also up 9.2% since 30 March, just a bit over a week ago.
ASX tech shares of all stripes are participating in these gains. Take Afterpay Ltd (ASX: APT). Afterpay shares are up 3.4% today and are, at the time of writing, back above $120 a share. It was only last week that Afterpay had done the unthinkable and fell down to just over $101 after making a new all-time high of $160 a share in February. Other ASX tech shares are also bouncing back. Zip Co Ltd (ASX: Z1P) shares are up almost 16% since 30 March after falling close to 50% since 16 February at one point. It’s a similar story with Xero Limited (ASX: XRO), which is up more than 20% over the past month.
There has been a pretty enthusiastic bounce for ASX tech shares whichever way you look at it. Of course, that comes after what has been a horror month or two for tech. Between 10 February and 9 March, the All Technology Index fell 18%. Even after today’s moves, the index remains down more than 8% from its February high.
So what’s behind this move?
Bonds fall and push tech higher
Well, it’s not hard to find a possible answer if we look at what was holding ASX tech shares down in the first place. And that would be rising bond yields. As we’ve covered rather extensively over the past month or two, government bond yields have been on the rise lately. That’s both here and in the United States. Higher government bond yields result in many investors re-valuing tach shares. That’s because these companies are often priced on their future cash flows rather than what they make today.
But US government bond yields have actually been backtracking. As we reported last month, the US 10-year government bond yield hit a high of more than 1.77% on 31 March, its highest level since January 2020. But today, those same bonds have a yield of 1.67%.
This has sparked a surge in US tech shares. Since 30 March, the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) index is up around 5%. It’s likely that the ASX tech sector is taking its queues from US tech shares this week. If US government bonds remain off the boil or even fall further, it could well be back to the races for tech shares, and on to new highs.