What if the cross-currency basis blows out and swap lines reopen?
A dollar-funding scramble blows the cross-currency basis negative; non-US banks bid dollars at any price, HY credit and EUR/USD sell, VIX bids until Fed swap lines reopen. This rhymes with Sep-2008 post-Lehman and March-2020, when the basis gapped to multi-hundred-bp and the Fed's FX swap lines were the circuit-breaker. The tell to trade is the basis itself and FRA-OIS, not equities, which lag the funding signal.
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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 scramble for dollar funding sends the cross-currency basis sharply negative, forcing central-bank swap lines to reopen globally. The trigger decomposes into signed root‑shocks — US dollar (DXY) ▲ · Credit spreads ▲ · Financial conditions ▲ — which propagate through our causal graph to the markets below.