Causal implications · Monetary Policy · 2026-09-14

    Neutral Regime Anchors Expectations as Term Premium Dominates Short-End Policy Path

    HA·C:H
    Regime read

    With DFF at 3.63% and 10Y yields at 4.95%, the neutral regime implies policy is no longer stimulative but avoids restrictive drag. High-frequency evidence suggests equity returns remain sensitive to 25bp surprises (-1%), while tight HY spreads at 2.65% indicate markets currently discount the risk of a policy-induced credit contraction.

    Transmission channels (asset · direction · mechanism)
    SP500
    ▼lower
    Discount rate effect and downward revision of future dividends via equity risk premium channel.
    -1.00 ±0.30 pct return per 25bp shock1d
    UST 2Y
    ▲higher
    Direct adjustment of the expected path of the policy rate over the 2-year horizon.
    +8.40 ±2.10 bp per 25bp shock1d
    UST 10Y
    ▲higher
    Transmission via expectations of future short rates and partial pass-through to real term premiums.
    +4.50 ±1.80 bp per 25bp shock1d
    USD broad
    ▲higher
    Capital inflows driven by improved risk-adjusted returns relative to G10 peers.
    +0.45 ±0.15 pct per 25bp shock1m
    HY OAS
    ▶◀widens
    Widening of the excess bond premium due to reduced risk appetite and higher financing costs.
    +12.0 ±4.50 bp per 25bp shock3m
    Exposed sectors / factors
    FinancialsTechnologyReal EstateManufacturing
    What confirms it
    • ▲Tightening Credit Spreads
    • ▲Declining Real Activity
    What would invalidate it
    • ▼Yield Curve Inversion Deepening
    • ▼VIX Spike above 30
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    Monetary PolicyCredit & Financial ConditionsRates & Curves

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