Jari Stehn, Goldman Sachs' chief European economist, said the bank's financial-conditions index is back to exactly where it stood at the start of the year, even with the 10-year Treasury yield closing in on 5%.
Most of the hour treated the bond selloff as the thing to worry about. Stehn's own index says it hasn't actually tightened financial conditions yet, because rising rates have been offset by rising equities and a weaker euro.
"I'm not sure we're at the point yet where you can just rely on bond yields to do the tightening for you."
Stehn is Goldman Sachs' chief European economist, briefing "Squawk Box Europe" hours before the European Central Bank's rate decision.
I listened to the full segment so you can skip it. 28 minutes of audio, 9 minutes of reading.
Here are the 8 calls that matter.
👤 Guest: Jari Stehn, chief European economist at Goldman Sachs
🎙️ Hosts: Steve Sedgwick and Ben Bulos, who co-anchor Squawk Box Europe on CNBC
👥 Also on: Sergio Ermotti, chief executive of UBS, in a separate soundbite on investor complacency; CNBC's Aneta and Dan, on the ECB preview and the oil market
📰 Published: 10 September 2026 on YouTube (CNBC's Squawk Box Europe)
🔴 YouTube | ⏱️ 28 min | ✅ Time saved: 19 min
Key Takeaways
The $5,000-per-adult dividend Trump promised Republicans would cost about $1.35 trillion — more than the government's entire annual interest bill
That is roughly a fifth of all federal spending, on Ben Bulos's estimate
The Treasury's $6 billion buyback fell short of the $8 to $10 billion some on Wall Street had wanted
UBS chief executive Sergio Ermotti says clients are growing complacent even as new risks pile up on top of unresolved old ones
Advisers are reportedly weighing the possibility the Iran war runs through the end of Trump's second term, to January 2029
Goldman Sachs puts $120 a barrel on Brent as a risk scenario, not its base case, if the US and Iran keep trading strikes in the strait
Europe's financial conditions haven't actually tightened, because rising equities and a weaker euro have offset the bond selloff
Europe's economy grew a decent 1.2% to 2% annualized in the first half, but its potential growth rate is only about 1%
The ECB will hike on unanimous, robust grounds today and then say almost nothing about what comes next
A cold winter could push gas prices above 100, Stehn estimates
Europe's sovereign bond spreads have stayed benign even as global yields rise, which Stehn calls the encouraging part of the picture
1. The $5,000 Promise Math
Donald Trump used the first night of the GOP's midterm convention in Dallas to promise a payout if Republicans keep Congress.
Trump tied the payment to the economy's performance. "If the Republicans win the House of Representatives and the United States Senate, both of them, because of our economic, tremendous economic success — like in history we've never had anything like what's happening — but because of our tremendous strength and success economically, I will issue a dividend to every adult citizen in the United States of America for $5,000."
Sedgwick ran the arithmetic live. "There are roughly 270 million adult Americans out of a total population of 342 million — we're all doing the math, so get your calculator out, I can do it for you — it's roughly 1.35 trillion."
He set that against the government's own numbers: "Where's the money going to come from when you've got a 6% deficit, a debt-to-GDP over 120%, and you've already got an $893 billion defense budget which is being dwarfed by $1.25 trillion worth of debt interest payments per year at the moment? So $1.35 trillion for the $5,000 handout is actually even larger than the current interest payment."
He connected it directly to borrowing costs. "For every single American you're paying 6.97% if you want to take out a 30-year mortgage — these are the highest levels in years," which he attributed to investor concern about spending and deficits pushing yields higher across the curve
Ben Bulos put a share-of-GDP figure on it. "That figure, the $1.3 trillion you were saying... that's about 5% of US GDP, it is about a fifth equivalent of all federal spending annually," and more than the defense budget
He questioned how far the money would stretch when "diesel is more than $2.20 more expensive per gallon than it was a year ago? Gas is more than a dollar a gallon more expensive than a year ago," with mortgage payments also up hundreds of dollars a month
2. The buyback that fell short
Treasury yields jumped to their highest level in almost three years after Treasury Secretary Scott Bessent announced a $6 billion buyback of long-term debt. The move was a step up for the department, which had vowed to double purchases, but it landed short of the $8 to $10 billion some on Wall Street had estimated
Bessent used the same Dallas convention to make a rare kind of speech. He marked the first time in 50 years a sitting Treasury Secretary has spoken at a national political convention, touting the administration's economic record while saying Democrats "brought this country to the brink of ruin" under Joe Biden
The yield did ease slightly once the auction showed robust demand, though Sedgwick said levels were still the highest in about two years and weighed on US markets alongside the three-day losing streak in the Dow, S&P and Nasdaq
3. Ermotti on Complacency
UBS chief executive Sergio Ermotti, in a separate interview with CNBC, said clients are diversifying because new risks keep arriving before old ones are resolved. "New problems or new issues are emerging without any of the old ones being addressed or being closed, and this is really pushing clients more into diversification."
4. A War Past Trump's Term
CNBC's Dan reported on the escalation in the Strait of Hormuz as Brent held above $100 a barrel.
President Trump's own advisers are reportedly weighing a longer conflict. A Wall Street Journal report, citing Vice President JD Vance, Secretary of State Marco Rubio and other senior officials, raised the possibility Iran could withstand the pressure and the war could extend through the rest of Trump's term, past January 2029
The latest wave of strikes was the biggest yet. The Iranian Revolutionary Guard Corps said it hit two US vessels and eight oil tankers; US forces destroyed five IRGC-linked crude carriers this week; Iran also targeted Jordan and its Houthi allies targeted Saudi Arabia
Goldman Sachs put a number on the risk, not the base case. "Goldman Sachs also saying Brent could move above $120 a barrel if the US and Iran keep up their attacks in the strait over the long term — that is the risk scenario, not necessarily the Goldman base case," Dan said, calling it evidence of a fast-growing geopolitical premium
Trump struck a more optimistic public tone than his own advisers. "Listen, their country is in shambles right now — they are, as you probably have seen the numbers, 300% inflation, their money is valueless, they're not paying their soldiers — we control the strait and lots of other things, so for a little while I would say — this shortly, but right after the election, because they'd like to have it that way — but right after the election, oil prices are going to be tumbling downward, they're going to be tumbling down, and we'll get them down, I think, for gasoline, we'll get them below $2 a gallon."
5. The ECB's Real Question
CNBC's Aneta previewed the meeting, framing the debate as whether the current oil and gas spike is temporary or lasting.
The bank thought in June that the Middle East conflict would end and energy prices would fall; that assumption no longer holds. Oil, especially, is hovering around $100, and gas — which filters into prices far more slowly than oil — is the bigger long-run concern, with some economists flagging 2027 as the year an elevated gas price would show up fully in inflation
The market is already pricing meaningfully beyond today's move. A further 25 basis point hike in October and a 50 basis point hike in December were both being priced in, taking the market's implied terminal rate to 3%
Isabel Schnabel's public signals have become a reliable hawkish tell, on Aneta's account, and point toward a possible December hike of 25 or 50 basis points depending on how long elevated energy prices persist
6. Conditions Aren't Tighter
Stehn said the bond move alone overstates how much has actually tightened. "Clearly long-term rates are going up, we're seeing that, but we're also seeing, at least up until now, that equity prices have been rising, the euro on a trade-weighted basis has been weakening. So when you look at our financial conditions index, which takes all of that into account, we're actually back right to where we were at the start of the year."
His conclusion is that yields alone cannot be relied on to do the ECB's job. "I'm not sure we're at the point yet where you can just rely on bond yields to do the tightening for you." He expects the bank to hike today but leave what comes next "quite open"
7. Growth Beat the Forecast
The first half surprised him to the upside given the shocks. "I would say the first half was actually pretty decent given the energy shock, given all the negativity out there, right — so we grew on average 1.2%, 2% at an annualized pace first half of the year."
He set the figure against a much lower ceiling, saying "potential growth in Europe we think is only 1%, whereas in the US it's more"
Early third-quarter data points to a slowdown, with retail sales and industrial production a little softer, from energy headwinds hitting the consumer
Reform and AI adoption remain the slower-moving question. "I think there's some encouraging signs, but I think the speed is still falling behind what we'd like to see in terms of the future path"
A cold winter is the specific risk he flagged for gas. Liquid gas flows out of the Middle East remain very limited even as the oil picture has relaxed somewhat, and "With a normal winter, or a mild winter, it might be okay, but with a cold winter we estimate that gas prices could go above 100 in the winter"
8. Credit Beats Sovereign
Stehn attributed most of the yield rise to forces outside Europe's control. "Most of it is probably driven more by global factors at this stage — it's driven by hawkish repricing of global central banks, of the fiscal situation in the US, issuance by hyperscalers and so on"
The encouraging counterpoint is how Europe's own sovereign spreads have behaved. "Sovereign spreads in Europe have broadly been behaving in a benign fashion — when you look at Italy for example, so you're not getting this sort of extra kicker on top in terms of sovereign spreads widening when the safe yield is going up"
Clients are increasingly asking about corporate credit as an alternative to sovereign debt within the safer part of a portfolio, prompted by how tight spreads have become. Stehn said that conversation is fair to have, but "it remains at levels I think that are digestible from a European perspective"
Bonus Insights
Sedgwick admitted to attending a rival bank's leveraged-finance conference the day before, joking he wouldn't name it, only for Stehn to note Goldman had held its own major event that week
A brief cross-promotion aired for CNBC's "Executive Decisions" podcast, hosted by Sedgwick, featuring London Stock Exchange Group chief executive Julia Hoggett on decision-making under uncertainty
Stehn's bottom line is that the ECB hikes today on a comfortable, near-unanimous basis and then declines to commit to anything else, leaving the next move to hinge on how long oil and gas prices stay elevated.
Products, Companies & Tools Mentioned
UBS (Sergio Ermotti's bank; he cited rising investor complacency in a separate CNBC interview)
Goldman Sachs (Jari Stehn's employer; also the source of the $120-a-barrel Brent risk scenario cited by CNBC's Dan)
Apple (Headline tease: the iPhone Duo foldable phone, priced just under $2,000, unveiled under new chief executive John Ternus)
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