What if banks freeze CLO warehouse funding and halt new loans?
Banks pulling CLO warehouse lines strand half-built deals and freeze new leveraged-loan supply, so primary issuance stops and existing loan/HY spreads gap wider on the demand vacuum. Rhymes with 2007-08 when warehouse financing seized and the leveraged-loan calendar collapsed, leaving banks with hung bridges. Forward angle: leveraged loans are now more bank-warehouse-dependent than ever — the choke point hits supply before it hits marks; watch loan ETF (BKLN) and CLO BB.
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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 6–18 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. Banks pull warehouse financing as loan prices fall, stranding half-built CLOs and abruptly halting new leveraged-loan issuance. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.