The Dividend Cafe - Monday - August 24, 2026

Episode Date: August 24, 2026

Today's Post - https://bahnsen.co/3U6PdsL David Bahnsen opens from The Bahnsen Group’s new Santa Barbara (Montecito) office, briefly recaps markets (Dow up ~0.25%, S&P down ~0.25%, Nasdaq down ~0.75% led by semiconductors; staples and financials up, tech down), and argues recent 10-year yield trading has been relatively range-bound. He focuses on Treasury Secretary Scott Bessent’s announced 30-year Treasury buybacks ($2B now, potentially $4B in September) aimed at lowering long-end rates and term premium, likening it to an “Operation Twist” style intervention. Bahnsen says the move briefly lowered the 30-year yield about 10 bps but largely failed and is unlikely to work long term, criticizing government attempts to override market price discovery. He attributes higher long yields mainly to 30-year market illiquidity and new competing long-dated issuance from AI hyperscalers. He also covers U.S.-Canada tariff threats and retaliation, upcoming data/events (PCE, durable goods, Nvidia earnings, Warsh at Jackson Hole), WTI down ~2.5% near $85, and promotes his new book, “Profit from the Prophet,” releasing tomorrow. 00:00 Welcome From Montecito 01:06 Market Snapshot Today 01:38 Is Bond Volatility Overstated 02:58 Treasury Buyback Plan Explained 05:53 Did It Work Short Term 06:59 Can It Work Long Term 07:55 Why Long Yields Rose 12:05 Concerns About Intervention 13:52 Tariffs Canada Trade Spat 15:30 Week Ahead Data And Jackson Hole 16:27 Book Launch And Wrap Up Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividing Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Hello and welcome to the Monday Dividendon Cafe. Hi, I am your host, David Bonson. I am very excited to be recording from our brand new Santa Barbara, California office here in beautiful Montecito. You will have to wait for a tour of the office. I'm sure we'll put that up on social media in a few days. but in the meantime, we're up here getting this up and running and we'll be announcing it to the world shortly. It is a very exciting time for us at Bonson Group and excited to announce a few new people joining us in such a beautiful space.

In the meantime, today is going to be a very different Monday Diven Cafe because I'm going to very quickly go through our normal things, but I've devoted extra amount of time to what I consider to be a very important story that broke in financial markets, late last week. And rather than devote the Friday Dividend Cafe to something wonkier, like Secretary of Besson's intervention to the long end of the yield curve and the Treasury market repercussions therein, I decided to let you Monday listeners and readers enjoy such pleasure. The markets today, the Dow was up a little over 100 points. It was about a quarter percent. To the upside, the S&P was down a little over a quarter percent. The NASDAQ was down about three quarters of a percent. It was semiconductors that got hit a bit on the NASDAQ side. The

S&P was down one and a half percent last week and you have now only about 50 percent of the names in the S&P that are above their 20-day moving average. So you saw a little bit of momentum come out of the market, but of course things had been rallying quite a bit before that. By the way, speaking of market volatility, and I'm about to spend a lot of time talking about the Treasury bond market, but we hear a lot of talk about the 10, year, well, about bond market volatility and interest rate volatility, bond yield volatility. Did you know that the 10-year treasury yield for three calendar years now has been in a range of 130 basis points, basically something in the high threes up to about 5%, which is more or less

the tightest, lowest bandwidth over a three-year period that we've ever seen? And I would argue, even that doesn't really tell the whole story because we got above 4.8 to the 5% range, which is adding like 20 basis points of bandwidth to the up and down movements for like five seconds, a very brief period of time where the 10-year hit that level within the last three years. So depending on how you're defining bond market volatility, I would disagree with that assessment. In today's equity markets, it was consumer staples that carried the day. They were up 1.76%. Financials were up about 1.5.

And then it was technology. I mentioned the semiconductor sell-off, which was down 1.6%. So I'm going to go through what the Treasury Department has announced, why they're doing it, whether or not it worked, whether or not it will work, big picture, longer term, and why long bond yields had been going higher and what the catalyst was to this Treasury market intervention, what my concerns are, what the conclusion is. So it sounds like that's a lot, and it kind of is,

but I want to give you a full perspective on this because it is an important topic for financial markets. So effectively what they're doing is Treasury Secretary Scott Besson on Thursday, it was Wednesday after Market announced that they were going to be buying back 30-year treasury bonds. And that they were going to be buying back $2 billion, and then he said it would go up to $4 billion in September. And it was an attempt to bring interest rates down at the long end of the yield curve.

He said there might be more to come, which is an attempt to use forward guidance, like trying to affect a policy outcome by signaling a policy action. You could call it a sort of Operation Treasury twist. You remember Operation Twist under then Fed Chair Ben Bernanke post-financial crisis where the Fed was using their purchases at different spots in the yield curve to affect what they wanted the shape of the yield curve to be. And now you kind of have the Treasury Department doing it.

Now, there is a big difference, of course, because the Treasury Department can't make money and they can't just create money and the Fed could. So you have a little more, shall we say, bulletin. in the gun when you can print money out of thin air and when you're just simply replacing one spot of what debt you owe, which is the Treasury Department right there, the debtor with another maturity of what you owe, it's a little bit less efficacious. But they are consciously, purposely, admittedly trying to manipulate term premium in the bond market to affect a policy objective. What I mean by this is that there is a premium right now in the marketplace for 30-year

bonds over 10-year bonds, for 30-year bonds over one-year bond, for 10-year over two-year, what have you, and that the Fed is intervening to try to interrupt and interfere with the amount of that premium. And so that's why, that's what they're doing. Now, why are they doing it? I want to read Secretary of Besson's words himself. Markets were getting it wrong. referring to long bond yields moving marginally higher in the last week or so. My own belief is that mortgage rates are connected to the long bond. It's a focus that you can understand for concern with the administration to bring mortgage rates down.

Mortgage rates are very connected to the longer bond yields. But now let's ask ourselves if it worked. First of all, I'm going to give you some data to just answer the question for you in a two, three, four day period. but I also think that the more important question is going to be bigger picture, longer term. But, you know, right out of the gate, the 30-year treasury yield was 5.3% last Tuesday. It was 5.28% Wednesday when the announcement was made. And it dropped a 5.18% for a short period Wednesday after the announcement.

All right. So he brought the 30-year bond yield down 10 basis points after making the announcement. Not too much. But then it was back to 5.25 at the close. Friday, by Friday's close, actually, it was up to 5.28. It did come down a few basis points today. So it's kind of right in the middle of where it was and where it went after the announcement, but barely really moving it all.

I mean, net, net, net, five basis points lower since he made the announcement. So no, I mean, they didn't succeed in threatening the bond market into submission. Now, a bigger question is, can it work longer term? I want to read from my own writing here because I want you that are watching and listening to get the exact same content that the readers are getting because I think this is the most important part I would say. It is not my opinion that the government can or should attempt to do what market forces will not do for them. They shouldn't because it represents a distortion and intervention that comes at a cost. They can't because prices are discovered.

not imposed, and that includes the price of money. Secretary Bessent was a global macro trader in a past life, and I have no doubt that he knows how to get the market's attention for short-term trades. But no, I do not believe this can work beyond a trade, because what sets the price of money long-term is expectations for nominal GDP growth, not short-term trading. Now, why were long bond yields going higher that got the Treasury Secretary's attention. It invites a lot of opinions and I'm just going to give you mind. And I recognize there are some people that have a different theory of the case. If I didn't believe in my theory of the case, then I would change my opinion. But this is my opinion because it is my theory. And I have a lot of confidence in it. There are some who would say,

well, U.S. national debt is so high, it pushed long bonds higher. I find that to be by far the weirdest, silliest of all explanations, that the national public debt went up. $25 trillion over a 20-year period. And all of a sudden, in the last few months or weeks or days, all of a sudden bond markets got worried about it. And they got so worried that they pushed the long bond yield to the same place it was back when the national debt was $8 trillion. I don't think the bond market likes the national debt. And I don't think any of us should. But I think the national debt is a massive compressor of U.S. economic growth puts downward, pressure on U.S. economic growth. And all of a sudden, it's pushing bond yields up, like $39.9 trillion

of debt was okay, but at $40 trillion, now we're worried. That's a deal breaker for the bond market. It makes no sense. What I think the two most logical explanations are, and again, this is just my humble opinion, but number one, it's a relative illiquidity of the very long end of the yield curve. The 30-year maturity market does not trade a lot. It is not the instant cash baron. the T-bills are, which are the most deep and liquid financial assets in the world. And it is not the price signal that the 10-year treasury is either. Only 5% of our $32.5 trillion treasury market is in the 30-year maturity spectrum. So it is a thin, inefficient market and bond yields move disproportionately to other spots of the curve.

I also would point out, by the way, that you do. not help the illiquidity of that segment of the market by taking supply out of the market, which is what they are doing. But I would argue that the bigger issue, I mean, I guess both of these matter. I don't know that I would put number one or number two on it. If you want to call it a tie, that's fine. And David Bonson's theory of the case. But there's just been an explosion of bond issuance competing with treasury bonds where there normally hasn't been for this long-dated debt. There's competition for treasuries. New supply pushes prices down. That means yields going up. This competition has not really been from Germany or Japan or the European Union per se,

some other global sovereign issuer. It's been from AI, hyperscalers. These are companies that have not issued a lot of debt, period, let alone a lot of long maturity debt. And all of a sudden, they're raising more debt than they ever have, trying to fund their AI capital expenditures. But these are highly profitable issuers with very high investment grade credits, so they are competing. It's a new level of debt that wasn't really imaginable, and it's an underrated element of which transpired in bond markets. It's created a new supply, which has pushed prices, lower, which is pushed yields higher, period. Now, there is a school of thought that Fed Chair Kevin Warsh has caused this by not giving insight into what the Fed is going to do.

And that's created an uncertainty premium in yields on the long end of the curve. Look, here's what I would say. The height of this alleged uncertainty in terms of what the Fed is going to do with overnight lending rates, why would that height of uncertainty exist in the long end of the yield curve? I think it is an unlikely explanation. But it's a legitimate one. as is, you know, those that think all of a sudden the bond market got worried about debt. But hopefully you can hear from my arguments why I think my two explanations are a bit more

logical, in my opinion, than the other two. So what are the concerns I have with this policy decision? Look, I will be honest with you. It's very hard for me to hear a Treasury Secretary justify market intervention by saying, well, we know better than markets. And I do not believe that's historically gone very well when government officials have to intervene in market price discovery this way. That includes discovery of the price of money. It was about a year and a half up to two years ago. Secretary Besson was saying that he wanted a

3-33 plan, and it was music to my ears. I loved hearing it. Three percent real GDP growth, a budget deficit that got down to 3 percent of GDP. It had been up above 6 percent, and 3 million barrels per day of oil production. Those were fundamental. economic objectives. This bond intervention is the opposite of that. It is not a fundamental economic objective. It is a market distortion. And that's where my concern would lie. But my conclusion is that ultimately $2 billion here and maybe $4 billion there, but where they're issuing short-term debt to pay for the long-term debt they're buying back, when you're talking about $32 to $33 trillion dollar treasury market, I think it's just peanuts. And you can flash a gun around, but when the markets

know that there are no bullets in it, you know, the Fed can print money. The Fed always has bullets, always. And markets know the Fed has bullets. But in this case, it's more or less cosmetic. And I am disappointed in how it's rationalized and I'm highly skeptical that it'll be effective. Now, let me leave that there, Secretary Besson. I welcome any of your questions on that Treasury intervention into the treasury bond market. From a public policy standpoint, one of the things today that you can see was not our big factor in markets, Dow was up a bit and NASDAG was down a bit, but Trump administration said, oh, our trade talks with Canada broke down and they've been ripping us off and we're going to impose these 50% tariffs on $25 billion of plywood and liquor

and electronic components and hockey gear and other elements that are obviously vital in national security. So Prime Minister Mark Carney said that, Canada will apply dollar-for-dollar retaliatory tariffs and acknowledge to his own people, that this is going to hurt them, that's going to impact prices to them when he's implementing the tariffs, but saying this is what we have to do to protect because of the United States implementing these tariffs on us. So there's no question that these things will push prices higher for American importers and American consumers. Now, this is $25 billion of goods we're adding tariffs to, let's call it $50 billion with Canada's retaliatory, our combined total

trade between the two countries is $960 billion. So it's just a very small piece for now. Does it escalate into a full trade war? The precedent has been no. The president ends up standing down. That's what I think the best outcome will be. And markets are certainly expecting that after 10 or 15 or 20 threats that have ended exactly that way over the last year. You may have heard Secretary Besson did have a press conference today where he announced a major financial offensive against Iran to damage the economy. I had thought we were already doing all that stuff, but we have kind of new rhetoric and new actions and new financial endeavors to try to squeeze Iran and blah, blah, blah. So this week, we'll get the PCE inflation report on Wednesday. We'll get durable goods orders Wednesday.

You will get Nvidia announcing their quarterly results, their little off cycle from the rest of the market, and they'll be announcing after market closes on Wednesday. And then Friday morning, 10 a.m. Eastern time federal reserve chairman, Kevin Warsh, will be speaking from Jackson Hole, Wyoming. I freely acknowledge Jackson Hole has been kind of a nothing burger for almost every year of the last 15 years. 2022 with Chairman Powell and 2010 with Chairman Bernanke were notable exceptions. I will wait and see myself because I don't know what sort of clarity versus ambiguity, what sort of direction he will offer and how markets will respond to it.

But I can assure you I will be watching. crude closed today down two and a half percent still sitting around $85 and I will leave it there we've covered a lot of ground today big announcement my new book profit from the profit coming out tomorrow is the street release date and if you are not a client of bonson group and you want to go buy the book tomorrow on amazon or barns and noble or ever fine books are sold we sure would appreciate it we'll see how well it can do in its first week out of the gate If you are a client of the Bonson Group, we, of course, are sending you a copy of the book. And if you're looking for what else is going to be happening later in the week that matters,

I will tell you, college football starts this weekend. Thanks for listening. Thanks for watching. Thank you for reading the Dividing Cafe. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. advisory services are offered through Hightower Advisors, LLC.

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