The Dividend Cafe - Wednesday - September 9, 2026

Episode Date: September 9, 2026

Brian Szytel reports a third straight market decline (Dow -405, S&P -0.5%, Nasdaq -0.7%) alongside falling bond prices and a 10-year yield up 5 bps to 4.84%, noting Treasury talk of increasing long-bond buybacks to $6B is too small versus ~$5.5T of long debt and was met by higher yields. He walks through a hypothetical of refinancing all long-term debt with T-bills, which could flatten the curve but would push short rates up, remove long-duration supply, and make U.S. financing resemble an emerging market, undermining the Fed and increasing fiscal sensitivity and inflation premiums. He notes T-bills are ~22% of issuance vs a ~15–20% target. He discusses Japan and Europe’s zero/negative-rate policies often producing unintended outcomes (carry trades, deleveraging, higher saving). No major data today; PPI tomorrow and CPI Friday. 00:00 Market Close Recap 00:33 Treasury Buyback Buzz 01:57 Yield Curve Control Limits 03:20 Why Borrowing Long Matters 04:13 Fed Mandate And Inflation Risk 05:16 Japan Zero Rate Lessons 06:33 Europe Negative Rate Backfire 07:18 Wrap Up And Data Ahead 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. Good evening and welcome back to Dividend Cafe. This is Brian Saitel with you here from our New York City office here at the Bonson Group in Midtown Manhattan. On another down day in markets, this is actually the third down day in a row. We were down about 405 points on the Dow. So they call that almost 8 tenths of a percent. S&P was down about half of a percent. NASDAQ was down about two-thirds of a percent. So I'd say modestly lower. You did have a sell-off and bond prices and a rise in yield.

Ten year was up, five basis points, closed at 484. It's interesting because the Treasury Secretary mentioned that they were going to up their long bond buying buyback program to $6 billion. In the grand scheme of about $5.5 trillion worth of long debt, the U.S. owes. $6 billion just isn't very much to move the needle there. And so what I wanted to kind of go through is a scenario, a hypothetical, because sometimes thinking about things in the most dramatic way helps to understand how markets might move around things on the margin too.

And I view $6 billion on what would actually happen to really control the yield curve to lower long-term rates as an afterthought. It's a rounding error from the amount of money standpoint. But it does send a message, and that message is somewhat political. And there is midterms coming up. So you've got inflation that's been higher. You've got gas prices, which most people attribute and hurts their consumption ability that are also higher with the Iran war.

And having an effort and telegraphing that effort to try to lower mortgage rates, which ultimately are tethered to those long-term treasury rates, I think is a good thing politically. Do I think that, like I said, $6 billion divided by $5 trillion? Does that move the needle? No. And actually, that's what the bond market told you today, because yields were basically up across the curve on the news. So that's the market and the bond quote unquote vigilantes pushing back on what what the house, as Besson called himself, is trying to accomplish with lowering rates across the curve. They'd have to do a whole lot more.

So the example I wanted to run through is what if they just refinanced all the long term debt? So every single treasury bond over 10 years, what if they bought them all back and they financed it with T bills? So they could just borrow short term. There's lots of money markets that buy that stuff. There's lots of different reasons that they could be able to raise that kind of capital. It would send short-term rates up on that, which effectively is doing some of the work for what the Fed may ultimately do by raising rates, by doing that because it's sending the supply in that market to up a whole lot, and the demand would ultimately stay about the same. And so prices would go lower and the yields would go higher. So that would raise short-term rates, and then what it would do theoretically is you're taking all of the long debt off of the market.

And so all the pensions, all the different banks, all the different companies and businesses that need to fund long-term liabilities, insurance companies especially, still have to buy long paper. Now, they might just shift that into the corporate market. I suspect that they would do that. Nonetheless, it's taking all that supply off the market. And so you'd have the same amount of demand, less supply, hence prices would go up and yields would go down. So it's a curve flattener, is my scenario. So if you walk through that scenario in the most dramatic way, it would move T-Bill holdings up to about $12 trillion from about $5 trillion now. So we have a target or the Treasury sets a target of roughly 20% or so, 15 to 20% of total outstanding debt to be in short-term paper.

Why did they do that? Because the U.S. has afforded this luxury of being able to borrow long-term. Other countries are willing to lend us money for 30 years, 20 years. Not every country can say that. And what that does is it terms out our debt. And so when you have short-term spikes and interest rates, that doesn't affect the country's ability to fund itself. If you're now just taking that benefit away from the U.S. and you're moving it all into short-term paper,

you start to look a little bit more like an emerging market country, frankly. They're not able to borrow long. They don't have that luxury. They haven't earned it because they haven't repaid it, and they haven't kept their currency stable. And so countries and people and businesses aren't willing to lend to them in a long-term basis. Nonetheless, this is a hypothetical.

I'm not saying this is what would happen. I'm just walking you through the reasons as to why this yield curve control with the Treasury is pretty limited. They really don't have the intention of moving all of the debt down to short-term because there's real negatives with that. And that's not to mention it would completely undermine the Fed's ability to serve its dual mandate, too. Because if you think about all of that debt rolling over every 90 days, that means that every time the Fed were to raise rates, it blows a hole in the fiscal budget. Every time they cut rates, it's dramatically heightened as far as

the sensitivity and benefit to the fiscal budget. And so you end up kind of getting something politically untenable. And you get what I believe would eventually be just an inflation premium priced into the debt. So actually, rates could go up after all of this because countries would say, hey, the U.S., the Fed, the way that it has worked to control inflation is no longer going to be efficient. And so we're going to reprice that and we're going to basically demand a higher interest rate to lend money to the country. So just some food for thought as we talk about what the Treasury is doing and some dramatic hypotheticals with it to kind of walk you through a little bit. Moving it all the short term is untenable. And I don't think that's what Bessent is after. But they are technically over their target.

The T-Bill issuance right now is at about 22%. And they're historically more about 17%. The question in there today was about Japan. I wrote about this a few weeks ago now. And about keeping rates at zero or financial repression, wouldn't that juice the economy? Because it would be cheap money and otherwise it would flow into people wanting to spend it. And in theory, you're totally right. I agree.

That's the whole idea of it. That's what Japan and Europe did. But in reality, it achieved the opposite. And the problem with Japan was that they tried to create this or stave off default. by putting rates all the way down at zero or negative JGBB rates were at zero and making the money as cheap as it possibly could. The problem is all of that freeness or cheapness of money basically went into a carry trade or it went into de-leveraging the country that was massively over-leveraged from the 1980s. And so what you had is basically an entire generation, a 30-year period of cheap money going to just pay back the consumption that was happening in the mid-80s. So it didn't achieve the result.

And just until now, it took in that full 30, 40 years to come out of it at this point. Now you have positive growth and you've got some inflation happening there. But you also have a real weakening yen. And so it's always give and take with these things, currencies, how much you can borrow and get away with. And ultimately, what I've called a diminishing return for monetary policy. The more you do it to excess, the less it is going to work. The other example I wanted to point to is in Europe, when you had the Europeans actually take in many countries, take their rates negative. So like their Fed funds equivalent, their central bank rate negative.

And what they thought was that it would spur spending and consumption and growth. Because if your money is losing money, literally sitting in a bank account, you should go invest it or spend it. What happened, people actually saved more because there was a negative rate of return and they felt like they needed to save more in order to offset the drag from negative real rates. And so these things aren't a free lunch. And it doesn't matter how much engineering you put into it if you're ultimately spending a whole lot more than you're making, that's eventually going to turn out poorly. That's about as simple as I could say it to anyone, any client or friend or family member or anyone reading us here on Dividing Cafe. But I'm going to let you go. There was no

economic points on the day to day, so I'm not going to spend time talking about some meaningless things. Now, tomorrow, we'll get PPI and then we have CPI on Friday. So stay tuned for those. Those are big deals. But with that, I'll let you go for the evening. I appreciate you listening, and I'll be back with you tomorrow from New York City. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower 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 TIRN will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. the investment opportunities referenced herein may not be suitable for all investors. All data and information referenced here in 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 emissions from the, the obtained data and information referenced here end. 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. Hightower 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.