What if mortgage-spread volatility spirals through agency mREITs?
An MBS-spread vol spike forces agency mREITs (AGNC, NLY) into pro-cyclical delevering and book-value destruction as repo haircuts widen; the clean read is short the mREIT complex and long MOVE/vol, widen HY. Rhymes with March 2020, when basis-trade and mREIT margin calls forced fire-sales until the Fed restarted MBS QE. Transmission is US-rates-plumbing, not credit-default. Forward angle: with the Fed in QT and no buyer of last resort pre-committed, a 2020-style spread blowout could overshoot before any backstop — roots reasonable.
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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 (electric blue) over time vs the market's (Polymarket, amber), 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. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. A spike in mortgage-spread volatility triggers margin calls and book-value collapse across agency mortgage REITs. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.