US Bonds: The Cost of Capital — June 22, 2026 [RISK ON]

REGIME: The current market regime is BULLISH, as indicated by the Alphameter score of +13/100, which suggests a risk-on environment where rising yields still signal growth and long bonds barely earn in either regime, with TLT yielding +1.3%/yr risk-on and +1.2%/yr risk-off. SENTIMENT DRIVER: The most important headline catalyst is "Regime change but in a velvet glove': How Kevin Warsh has set out to remake the Fed", which may lead to expectations of a more hawkish monetary policy, causing US Bonds price to decline by -1.7% in the last 7 days, as investors anticipate higher interest rates. ANALYSIS: Through the lens of the Cost of Capital, the current steepening yield curve, with a 10Y-2Y Yield Curve Spread of 0.27%, implies a risk-on environment, where growth expectations are high, and investors are willing to take on more risk, which is consistent with the Alphameter's risk-on signal. The yield curve shape suggests that investors are demanding higher returns for longer-term bonds, which is a sign of a healthy economy. However, the backtest data shows that long bonds, such as TLT, barely earn in either regime, with a yield of +1.3%/yr risk-on and +1.2%/yr risk-off, indicating that the traditional defensive role of bonds has been broken in the post-2020 rate environment. RISK FACTORS: Two specific catalysts that could flip the signal BEARISH for US Bonds are a 10Y-2Y Yield Curve Spread below -0.1%, indicating a yield curve inversion, and a Core PCE Price Index m/m above 0.5%, which could lead to a more aggressive monetary policy tightening, causing US Bonds to underperform. WATCH: On 2026-06-25, the Core PCE — Core PCE Price Index m/m will be released, with an estimated value of 0.3%, which could impact the US Bonds price action and the overall market regime, as a higher-than-expected reading could lead to a more hawkish monetary policy stance.