Good morning, investors. Micron closed above $1,000 a share for the second trading session in a row while Nvidia has declined both days.
But the next catalyst for the AI trade may have more to do with the most boring assets in your portfolio than a memory shortage.
Bond twist
Scott Bessent is pushing the Treasury to buy up more of its own long-term debt.
The US Treasury is set to double the size of its buyback operations for long-dated bonds to at least $4 billion per operation, up from a $2 billion ceiling, with more concrete news due later this morning.
This ramp-up is set to run through November 4, though Bessent has said they could still get bigger.
The further he pushes above $4 billion, the more serious we can assume he is about wrangling long-term yields.
The program itself is not new — Treasury has run buybacks since 2024 — but the scope and aim are notable. This amounts to something like an attempt at refinancing national debt.
The Treasury will buy older, thinly traded bonds back from primary dealers and fund those purchases by issuing more short-term bills.
“We believe that there are many underlying factors in turn that the market is not looking at,” Bessent said in August.
“We are going to make a market in these.”
As far as I understand:
Buying older bonds gives dealers and investors cash and balance sheet capacity to bid on newly issued Treasuries
Fewer long-dated bonds and more bills should pull long-term yields lower
Mortgage rates and corporate borrowing costs could start to come down with long-term yields
The 30-year bond yield hovers at 5.24% and the 10-year sits at 4.79% as of this writing.
Neither has moved much since Bessent made his announcement last month, which suggests Wall Street remains unconvinced that this plan will work.
Equity investors, meanwhile, have the most to gain if the intervention works as intended.
High-flying AI and technology stocks, for instance, derive much of their value from cash flows projected far into the future.
Lower long-term yields can juice present valuations and, in this market, keep the AI trade humming.
A message from Harbor Capital Advisors:
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Elsewhere
🤖 Qualcomm and Amazon inked a deal to co-design custom AI chips for AWS data centers. The multi-year agreement pairs Qualcomm's inference silicon with Amazon's Trainium roadmap and pushes both companies deeper into the second-tier of the accelerator race behind Nvidia. (Yahoo Finance)
🎯 Iran said it would treat any US submarine entering the Strait of Hormuz as a hostile act. The statement came hours after the Pentagon confirmed a nuclear-powered attack sub had transited the region. (CNBC)
✈️ President Trump disclosed a Boeing stock purchase the same day the company won an $880 million Navy contract. The filing shows the trade executed hours before the contract announcement, reviving questions about executive-branch trading disclosures. (Barchart)
Rapid-fire
Canada hit the US with retaliatory tariffs of up to 50% on $20 billion of goods (Yahoo Finance)
SpaceX suppliers are set for a potential jump on the next Starship launch cadence (Bloomberg)
This investment thesis sees the advent of AI driving a new form of consumerism (Passing the Torch)
The Japanese Yen is up 5% against the US dollar over the last month (Barron’s)
Copper prices soared to an all-time record with traders seeing upside ahead (Yahoo Finance)
Global stocks keep getting cheaper as they go up (Opening Bell Daily)
A $320 million exchange hack just exposed new cracks in crypto custody (Bloomberg)
On this day
🗓 September 9, 2008: Lehman Brothers stock crashed 45% after talks with Korea Development Bank fell apart. The firm filed for bankruptcy within a week.
Last thing
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