The Dividend Cafe - Wednesday - August 19, 2026

Episode Date: August 19, 2026

Brian Szytel reviews a rotation-heavy market day with the Dow up 120 points, the S&P 500 up about 0.25%, and the Nasdaq slightly higher, as equal-weight outperformed cap-weighted amid big moves in pharma and some late earnings from tech/AI. Treasury yields fell, with the 10-year down 7 bps to about 4.64%, following remarks from Treasury Secretary Scott Bessent about shifting issuance toward the short end and using it to buy back some long-end debt; while the $20B buyback is small versus the $5T in 20–30 year Treasuries, the signal suggests an effort to lower long-term rates, potentially at odds with a Fed under Warsh aiming to let markets tighten or loosen. He also explains Japan’s debt dynamics: while gross debt/GDP is ~240%, netting BOJ holdings and government assets brings it closer to ~80%, though higher JGB rates could raise debt-service costs and pressure the yen and BOJ policy. 00:00 Welcome and Setup 00:21 Market Close Recap 00:56 Treasury Buyback Shock 01:58 Fed Versus Treasury 03:46 Japan Debt Question 04:07 Net Debt Breakdown 05:06 Rates Yen and BOJ 06:11 Wrap Up and Disclosures Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Welcome back to Dividend Cafe. This is Brian Saitel with you this evening as your host here this Wednesday, August of 19th. On an update in markets, modestly speaking, the Dow ended up closing up 120 points. SMP was up about a quarter of a percent. NASDAQ was only up about 15 basis points. So it was a rotation day and equal weight SMP outperformed cap weighted by about almost eight-tenths of a percent. So there was a lot of winners and then a lot of offsetting losers, particularly some of the major pharma companies and some oncology results that were very positive.

So you had some big move up. You had a couple of different late earning season announcements too with some tech and AI companies. Those stocks were up. So just a bifurcated day overall. The yield curve moves substantially lower and there's a reason for that. But the tenure was down seven basis points. We closed 464 on 10. So that number has been drifting a little lower. I wrote about yesterday the perspective of where yields are on the long end. We hit the 30 year hit 5.3%. And my point was just that's been that level or above it for most of my 40-year life.

And the fact that it's risen from zero is a big move up, but that it's back to long-term averages. Those things are true. But today you had news out from the U.S. Treasury Secretary Scott Bessent that they were shifting the composition of issuance, and they're going to use the short end to basically buy back some of the log end. And if we really think about what that's doing, it's shorting the obligations of the Treasury onto the shorter end. If you look at the total amount of buyback, it was only $20 billion. Just keep in mind, there's about $5 trillion between 20 and 30-year treasuries. So the dollar amount is somewhat token. but the signaling isn't.

And I think it's interesting because you have a Federal Reserve under Warsh, which has explicitly said that they aren't going to have as much guidance, and they're going to let markets tighten or loosen on their own. And in this case, they have tightened. Why? Because growth expectations have been higher. Inflation expectations have been higher. And so the yield curve has steepened.

And that's technically a good sign typically for economic growth. That said, on the political side of things, So not necessarily the Fed, but remember the Treasury just inherently is more political because it's part of the administration, right? The appeasement on the political front to say, hey, long yields are a little bit higher than we like. And also, by the way, mortgage rates are tied to long end. And we want to have affordability. That's a very political state endeavor. This is a signaling that they're going to try to lower long-term rates by doing some of these things.

At the end of the day, it actually worked because rates went down. But it's pretty token as far as the total dollar. amount, but I do think it's interesting that those two things are somewhat at odds with one another. You have worshiped the Fed saying, let's let the markets do the work and be free, and then you have Treasury saying, I'm going to manipulate and try to lower the yield curve here a little bit. So keep that in mind. And my comment in there today, if you could read between the lines, is while those two things may seem at odds with one another, because they are, if you have the Fed that ultimately keeps

short rates anchored at the same level, and you have the continued effort by Treasury to do that, then technically you're financing short term to try to basically enact yield curve control through the Treasury. So I wouldn't put it past them. They're both very smart individuals. I do know that they know each other and talk to one another and have even explicitly said they would work in conjunction. So we'll see how that plays out. But some interesting moves there on the yield curve across the board. The question there was from a longtime client in front of mine that came in last week and it was about Japan's debt to GDP ratio. Wouldn't it be better to talk about the net debt?

to GDP ratio for the country. And it's astute because Japan is unique. Yes, on Prima Facy, it has 240% of debt to GDP ratio. That would be the highest of any major developed country. But when you peel back the onion a bit, most of that is offset by current holdings that the BOJ has. The Japanese government has a huge stockpile by 30% of GDP and FX reserves. It also has a huge stockpile of pension holdings, of loans. All of those assets are working. about 100% of GDP. If you think about it, it's a lot of money, a couple trillion dollars. The other thing is that half of all Japan debt is held by the Bank of Japan itself. So on a government balance sheet, the Bank of Japan owns the government debt and is remitting interest payments back,

just like the Fed would own its own balance sheet. It's just that Japan has done it on steroids, but it is the government owing money to itself. And so if you take those things out of the equation and net out assets minus liabilities and then money that's owed to itself, and just look at what is outstanding, it's only about 80% of GDP. So still a high number, but in the grand scheme of UK or France or Germany or the U.S., that would be more reasonable in middle of the pack. Now, the one thing to keep in mind is interest rates on JGBs are only about 1%. They've actually risen. They're closer to 2.5 now, 2.8% in fact. So as that stockpile of debt that is held rolls over to those higher rates, right now they're only at about 10% of government revenue.

is going towards servicing the debt, but as that rate resets into the twos and even the two and a half range, you're going to get much closer to the same level that the U.S. has. And so that's what's happening here on the release valve. The mechanism is that the yen has weakened substantially because of that inevitability. Interest rates have already moved higher, and the cost of interest expense will move higher with it, and the yen has weakened in front of that. It'll ultimately put pressure on the central bank, BOJ, to lower interest rates at some point. But that's what's going on with Japan. Very interesting and financially engineered long-term

experiment of what financial repression does, which we know growth has been stagnant there for 30, 40 years. So at the end of the day, there is no free lunch to this. Not much in the economic calendar out today, so I'm going to leave it there for you and let you get back to your evening. I will speak to you tomorrow on the Dividend Cafe. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC member FINRA and SIPC, and with high-tower. Tower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free at risk. There is no guarantee that the investment process or investment opportunities referenced Tyrion will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities, referenced TIRAN, may not be suitable for all investors. All data and information referenced Trian are from sources, believed to be reliable. Any opinions, news, research, analyses, prices, or other information

contained in this research is provided as general market commentary and does not constitute investment advice. The Bonsor Group in Hightower shall not in any way be liable for claims and make no express or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced here in. The data and information are provided as of the date reference. Such data and information are subject to change without notice. This document was created for informational purposes only, the opinions expressed, are solely those of the Bonson Group, and do not represent those of Hightower Advisors LLC or any of its affiliates. High Tower advisors

do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client's individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for any related questions.