Macro Regime Score Rises, Risk-On Label Maintained

Overview The macro regime score increased from yesterday, keeping the label Risk-On with medium conviction. The change was driven by a risk appetite factor of +0.6222 and a volatility factor of +0.3613; growth and liquidity factors were negative. BIS systemic risk flags remain elevated in Australia, Brazil, Canada, and France.

Macro Regime The Risk-On reading is supported primarily by the risk appetite factor at +0.6222, the largest positive contributor, with the volatility factor at +0.3613 adding further support. The growth factor at -0.0404 and the liquidity factor at -0.1017 are modest drags. The Chicago Fed NFCI (National Financial Conditions Index) at -0.5660 indicates loose financial conditions. BIS debt service ratios are elevated in Australia at 20%, Brazil at 29%, Canada at 25%, and France at 21%. Those ratios measure the share of national income needed to service debt and can amplify market volatility if large investors (sometimes called “whales”) redeem or move to sell. The elevated debt service ratios in Brazil at 29% and Canada at 25% suggest those economies have less capacity to absorb higher funding costs, a channel that could tighten credit if the 10-year Treasury yield stays near 4.66%. Fed Chair Warsh is scheduled to speak at 14:00 UTC, coinciding with the release of the Non Farm Payrolls annual revision; the prior revision was -911.0.

Market Context The 10-year Treasury yield is 4.66% while the 2-year yield is 4.19%, creating a +47 bps slope (the difference between the two rates). Breakeven inflation, the market-based estimate of one-year inflation, is 2.33%. The 30-year mortgage rate is 6.66%. High-yield (also called “junk”) spreads are 267 bps and investment-grade spreads are 80 bps; these spreads reflect the extra yield investors require for taking on additional credit risk. The Federal Reserve’s balance sheet totals $6,730,912 million, and the reverse repo facility holds $0.456 trillion. Initial jobless claims are 203,000, and the University of Michigan consumer sentiment index stands at 49.50. In the cryptocurrency market, Bitcoin trades at $79,820, Ethereum at $2,500, and Solana at $107.22.

Watch Monitor the Fed Chair Warsh speech at 14:00 UTC, which coincides with the Non Farm Payrolls annual revision (prior -911.0). A large downward revision or hawkish language would test the Risk-On regime’s current risk appetite factor at +0.6222, while a benign revision and neutral tone would leave the risk appetite factor at +0.6222 as the dominant support.

Correction (Phase 623, 2026-09-27): this note gave the Federal Reserve's overnight reverse repo (ON RRP) usage as $0.456 trillion. The source series, FRED RRPONTSYD, is published in billions of dollars, so the correct figure for this date is $456 million. The stated figure was 1,000 times too large.