What if the 2s10s yield curve dis-inverts sharply?
A sharp 2s10s dis-inversion is the classic late-cycle tell — it bull-steepens via a falling front end as cuts get priced, lifting gold and easing mortgage rates. Rhymes with mid-2024 when the curve un-inverted ahead of the Fed's first cut; gold ground higher on lower real rates. Skeptic's note: dis-inversion historically leads the recession by quarters, not weeks, so this is a positioning/duration signal, not an immediate risk-off trigger.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a mixed shock. The US 2s10s curve dis-inverts sharply — the classic late-cycle recession lead. The trigger decomposes into signed root‑shocks — Recession signal ▲ · Fed policy path ▼ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | Financials XLF 📈 chart | Equity | ▼ -0.3% hist -0.54–+0.07% · other way +0.68% (n=11) |
| 2 | Gold XAUon Hyperliquid 📈 chart | Commodity | ▲ +0.3% hist -0.31–+1.28% · other way +2.39% (n=11) |
| 3 | US dollar (DXY) DXYon Hyperliquid 📈 chart | FX | ▼ -0.2% hist -0.49–+0.04% · other way +0.92% (n=12) |
| 4 | Tech sector XLK 📈 chart | Equity | ▲ +0.2% hist -0.47–+1.76% · other way -0.31% (n=11) |
| 5 | 2y Treasury yield DGS2 | Rate | ▼ -2bp model prior · unmeasured |
| 6 | USD/JPY USDJPYon Hyperliquid 📈 chart | FX | ▼ -0.2% hist -0.62–+0.16% · other way +1.58% (n=11) |
| 7 | 30y Treasury yield DGS30 📈 chart | Rate | ▼ -2bp hist -2.04–+2.3% · other way +25.2% (n=12) |
| 8 | 10y Treasury yield DGS10 📈 chart | Rate | ▼ -2bp hist -1.83–+1.4% · other way +30.6% (n=12) |
| 9 | EUR/USD EURUSDon Hyperliquid 📈 chart | FX | ▲ +0.2% hist -0.02–+0.38% · other way -0.49% (n=11) |
| 10 | GBP/USD GBPUSDon Hyperliquid 📈 chart | FX | ▲ +0.2% hist -0.05–+0.36% · other way -0.28% (n=11) |
| 11 | Turkish lira TRY 📈 chart | FX | ▲ +0.2% hist -3.82–+1.42% · other way +1.47% (n=11) |
Probable recommendation
Why we may diverge from history
Trust the cascade long on TRY: the -6% is dominated by the 2021 Turkish-lira rate-cut collapse, an idiosyncratic EM-policy blowup unrelated to a US 2s10s dis-inversion — swamped channel, wrong driver.
Historical precedent — what analogous events actually did
Across 40 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| US dollar DXY | SHORT | -0.3% · 5d -0.1% | 64% | 40 | 0.25 | ✓ matches cascade |
| XLK XLK | LONG | +1.5% · 5d +0.0% | 61% | 40 | 0.20 | ✓ matches cascade |
| EURUSD EURUSD | LONG | +0.2% · 5d +0.0% | 62% | 39 | 0.20 | ✓ matches cascade |
| TRY TRY | SHORT | -3.6% · 5d +0.2% ↺ fades | 60% | 39 | 0.18 | ⚠ differs |
| Bitcoin BTC | SHORT | -3.8% · 5d -2.5% | 62% | 37 | 0.18 | · |
| GBPUSD GBPUSD | LONG | +0.3% · 5d -0.1% ↺ fades | 60% | 39 | 0.16 | ✓ matches cascade |
| 30y yield DGS30 | LONG | +3bp · 5d +2bp | 59% | 40 | 0.15 | ⚠ differs |
| Gold XAU | LONG | +1.0% · 5d +0.0% | 59% | 40 | 0.14 | ✓ matches cascade |
| 10y yield DGS10 | LONG | +2bp · 5d +1bp | 57% | 40 | 0.11 | ⚠ differs |
| Volatility VIX | LONG | +1.4% · 5d +0.6% | 57% | 40 | 0.11 | · |
| High-yield credit HYG | SHORT | -0.1% · 5d +0.1% ↺ fades | 55% | 39 | 0.07 | · |
| XLF XLF | SHORT | -0.4% · 5d -0.5% | 52% | 40 | 0.04 | ✓ matches cascade |
| USDJPY USDJPY | SHORT | -0.5% · 5d -0.4% | 50% | 40 | 0.00 | ✓ matches cascade |
Why this probability
2s10s already dis-inverting/positive into cuts; near-baseline late-cycle move, high odds. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.