The seasonally volatile month of September got the better of the Afterpay Ltd (ASX: APT) share price, closing the month near 2-month lows of $121.32.
Afterpay slumped 9.8% in September, dragging its year-to-date return to a measly 2.81%.
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What's driving the Afterpay share price lower?
Square Inc (NASDAQ: SQ) slides to 2-month lows
Afterpay has closely tracked the performance of Square Inc (NYSE:SQ) shares ever since the US payments company announced its US$39 billion all-script offer.
The transaction will see Afterpay shareholders receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay share they hold on the record date.
The transaction is expected to close in the first quarter of calendar year 2022 so the US$39 billion offer could be materially different depending on where the Square share price closes.
It's worth noting the Afterpay share price has typically traded at a small discount to the implied transaction price.
Things were going well for Afterpay when the Square share price rallied to at all-time highs of US$280 in early August.
This implied a transaction price of approximately $144.18 per Afterpay share.
However, the US market began to roll over in the latter half of the month with Square shares closing the month at US$239.84.
This implies a transaction price of just $123.50 for Afterpay.
Tech shares tumble
The S&P/ASX 200 Information Technology (INDEXASX: XIJ) struggled to make it over the finish line last month, plunging 5.28% between 24 and 30 September.
Rising bond yields were the talk of the town, pushing investors out of popular, richly-valued tech shares.
Benchmark 10-year US treasury yields rallied strongly in the last week of September, surging 25 basis points between 22 and 29 September to 1.56%.
Ultra-low interest rates have propped up tech shares by making future cash flows appear more valuable in the present.
But looming interest rate hikes could pose a risk to the Afterpay share price and broader tech sector.
