What if Europe launches a common-defence Eurobond and floods supply?
A common-defence Eurobond facility is a supply-glut plus defense-capex trade: euro long-end and global duration cheapen on issuance while defense primes (Lockheed, Northrop, RTX) rally on order-book expansion. Rhymes with the 2020 NextGenEU/SURE joint issuance that markets absorbed without a spread crisis. The transmission is mutualized EU credit and the defense supply chain; the forward angle is that a permanent joint-bond precedent is a structural euro-positive long-term even as the near-term supply weighs — but the modeled VIX +5% and Nasdaq -2.3% look too risk-off for what is fundamentally an orderly issuance event, not a tail shock.
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 1–3 years 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 risk-off shock. Europe launches a jointly-guaranteed common-defence Eurobond facility, unleashing hundreds of billions in new mutualised issuance and a supply glut. The trigger decomposes into signed root‑shocks — Defense spending ▲ · Real yields ▲ · Credit spreads ▲ — 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 | Lockheed LMT 📈 chart | Equity | ▲ +1.4% hist +0.19–+1.58% · other way -2.86% (n=12) |
| 2 | Northrop NOC 📈 chart | Equity | ▲ +1.3% hist +0.07–+1.62% · other way -2.07% (n=12) |
| 3 | RTX RTXon Hyperliquid 📈 chart | Equity | ▲ +1.1% hist -1.06–+0.86% · other way -3.05% (n=12) |
| 4 | Tech sector XLK 📈 chart | Equity | ▼ -0.6% hist -0.51–+0.37% · other way +0.42% (n=12) |
| 5 | 30y Treasury yield DGS30 📈 chart | Rate | ▲ +5bp hist +1.45–+3.96% · other way +7.7% (n=12) |
| 6 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -0.5% hist -0.73–+0.8% · other way +25.41% (n=12) |
| 7 | Gold XAUon Hyperliquid 📈 chart | Commodity | ▼ -0.5% hist -0.42–+0.14% · other way -0.42% (n=12) |
| 8 | 10y Treasury yield DGS10 📈 chart | Rate | ▲ +4bp hist +1.37–+2.75% · other way +6.1% (n=12) |
| 9 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -0.4% hist -0.39–+0.18% · other way +0.4% (n=12) |
| 10 | Arm ARMon Hyperliquid 📈 chart | Equity | ▼ -0.3% hist -5.3–+4.3% · other way +4.98% (n=9) |
| 11 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -0.3% hist -5.21–+2.07% · other way +6.5% (n=11) |
| 12 | Robinhood HOODon Hyperliquid 📈 chart | Equity | ▼ -0.2% hist -4.41–+8.06% · other way +15.56% (n=11) |
| 13 | Homebuilders XHB 📈 chart | Equity | ▼ -0.3% hist -1.38–+0.37% · other way -1.35% (n=12) |
| 14 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.2% hist -0.64–+0.18% · other way -0.7% (n=12) |
Probable recommendation
Why we may diverge from history
Trust the cascade's SHORT on HOOD/MSTR: +15%+ realized clusters entirely in 2024-25 war windows when crypto/retail-trading volumes structurally surged — regime bias, not a defence-Eurobond supply-glut signal.
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 |
|---|---|---|---|---|---|---|
| HOOD HOOD | LONG | +8.2% · 5d +0.9% | 69% | 12 | 0.36 | ⚠ differs |
| High-yield credit HYG | SHORT | -0.6% · 5d -0.1% | 69% | 37 | 0.31 | ✓ matches cascade |
| RTX RTX | SHORT | -1.5% · 5d -1.6% | 61% | 40 | 0.19 | ⚠ differs |
| XHB XHB | SHORT | -1.1% · 5d -0.1% | 59% | 38 | 0.15 | ✓ matches cascade |
| US dollar DXY | LONG | +0.6% · 5d +0.2% | 58% | 40 | 0.13 | · |
| 10y yield DGS10 | LONG | +0bp · 5d +4bp | 57% | 40 | 0.11 | ✓ matches cascade |
| Volatility VIX | LONG | +5.1% · 5d +2.7% | 55% | 40 | 0.10 | · |
| XLK XLK | LONG | +0.6% · 5d -0.5% ↺ fades | 55% | 40 | 0.09 | ⚠ differs |
| SMH SMH | LONG | +1.0% · 5d -0.9% ↺ fades | 55% | 40 | 0.09 | ⚠ differs |
| ARM ARM | SHORT | -5.4% · 5d -4.7% | 56% | 7 | 0.08 | ✓ matches cascade |
| Bitcoin BTC | SHORT | -4.8% · 5d -2.7% | 55% | 22 | 0.08 | ✓ matches cascade |
| LMT LMT | LONG | +0.7% · 5d -0.5% ↺ fades | 49% | 40 | 0.00 | ✓ matches cascade |
| NOC NOC | LONG | +0.8% · 5d -0.1% ↺ fades | 48% | 40 | 0.00 | ✓ matches cascade |
| 30y yield DGS30 | LONG | +1bp · 5d +5bp | 48% | 40 | 0.00 | ✓ matches cascade |
Why this probability
EU defence-bond push gaining momentum mid-2026, but mutualised issuance faces frugal-state resistance. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.