Kresmion US Macro Score Rises Slightly; Strong Risk-Off Remains

Overview The main change since yesterday is a small positive delta in the Kresmion US macro-regime score, but the model still carries a Strong Risk-Off label with high conviction. Risk appetite and liquidity factors are deeply negative, while the growth factor is the only positive contributor. The current tension is between the positive growth factor and the negative liquidity and risk-appetite readings, with elevated debt-service ratios in Australia, Brazil, Canada and France adding systemic pressure.

Macro Regime The Strong Risk-Off label is driven by the following factor scores:

• Risk appetite at -0.8900 (most negative factor)
• Volatility at -0.7296
• Liquidity at -0.7229
• Growth at +0.4359 (sole positive factor)

The Bank for International Settlements (BIS) flags systemic risk as elevated for Australia, Brazil, Canada and France on debt-service ratios. Brazil’s ratio is 29% of income and Canada’s is 25% of income. These economies are sensitive to the current US rate and dollar environment.

Key Risks 1. An inflow of 13,320 ETH ($36M) from an unknown whale to the Coinbase exchange occurs while the risk-appetite factor is -0.8900, consistent with distribution into liquid venues during a Strong Risk-Off environment. 2. US high-yield option-adjusted spread (OAS) is 324 basis points, raising refinancing costs for the weakest issuers. The elevated BIS debt-service ratios in Canada and France create a transmission channel from higher US yields to household and corporate balance sheets.

Market Context

• US 10-year Treasury yield: 5.24%
• US 2-year Treasury yield: 4.78%
• Yield curve slope: +46 basis points (difference between 10-year and 2-year)
• US 10-year breakeven inflation: 2.36% (market-based inflation expectation)
• 30-year fixed mortgage rate: 7.28%
• US high-yield OAS: 324 basis points
• US investment-grade OAS: 86 basis points
• Chicago Fed National Financial Conditions Index (NFCI): -0.5480 (measure of financial stress)
• Federal Reserve total assets: $6.74 trillion
• Overnight Reverse Repurchase (ON RRP) usage: $1.50 billion (short-term liquidity tool)
• Initial jobless claims: 197,000
• University of Michigan consumer sentiment index: 51.70
• Fed broad dollar index: 120.33

Cryptocurrency prices: Bitcoin $85,768, Ethereum $2,706, Solana $120.47.

Watch The ISM Services Purchasing Managers’ Index (PMI) for the United States is scheduled for release today at 14:00 UTC. The forecast is 55.7 and the prior reading was 55.4. A print below 55.4 would align with the negative risk-appetite and liquidity factors in the regime model, while a print above 55.7 would provide evidence that services activity is holding up despite the defensive macro tilt. This release is the highest-priority calendar event in the next 48 hours.