Risk-Off Regime Persists as Canada Inflation Looms, Yields Steady

Overview The macro regime remains classified as “Risk-Off,” indicating a market preference for safety. The regime score moved further negative by 0.0271 since yesterday. This environment keeps defensive positioning in focus ahead of the upcoming Canada inflation release.

Macro Regime

• The growth factor is recorded at -0.7975, the largest negative contribution to the regime score.
• Risk appetite is at -0.5905 and volatility at -0.6299, both also negative.
• Liquidity measures sit at -0.2227, less negative but still not supportive.
• BIS systemic risk is elevated in the following countries, expressed as debt-service-ratio (DSR) percentages: Australia (20%), Brazil (29%), Canada (25%), and France (21%).
• The transmission channel identified is potential rerouting and higher freight costs for energy and goods.
• Household debt levels are elevated in Canada (25% DSR) and Australia (20% DSR). These ratios make the economies sensitive to the 30-year mortgage rate of 6.76% if financial conditions tighten further.

Market Context

• The 10-year U.S. Treasury yield is 4.95% and the 2-year yield is 4.56%, producing a yield-curve slope of +39 basis points (bps).
• The 10-year breakeven inflation rate, which reflects market-expected inflation, is 2.36%.
• High-yield option-adjusted spread (OAS) is 270 bps and investment-grade OAS is 80 bps; OAS measures the yield premium over Treasuries after accounting for embedded options.
• The Chicago Fed National Financial Conditions Index (NFCI) is -0.5640, a level that indicates relatively loose financial conditions.
• The DXY proxy, a measure of the U.S. dollar against a basket of currencies, stands at 118.07.
• Initial jobless claims for the week are 206,000.
• The University of Michigan consumer sentiment index is 55.20.
• The Federal Reserve’s balance sheet totals $6,740,619 million, and the reverse-repo facility holds $5.2550 trillion; reverse repo is a short-term borrowing arrangement using securities as collateral.
• Cryptocurrency prices are: Bitcoin $77,134, Ethereum $2,513, and Solana $101.25, each showing a slight decline over the past 24 hours.

Watch

• Canada’s year-over-year inflation rate will be released on 2026-09-14 at 12:30 UTC. The prior reading was 3.0 and no forecast has been published. All figures and names are presented exactly as reported, without interpretation or recommendation.

Correction (Phase 623, 2026-09-27): this note gave the Federal Reserve's overnight reverse repo (ON RRP) usage as $5.2550 trillion. The source series, FRED RRPONTSYD, is published in billions of dollars, so the correct figure for this date is $5.25 billion. The stated figure was 1,000 times too large.