What if the ECB cuts rates deeply negative again?
A deflationary bust dragging the ECB to -1% revives tiering and crushes bank NIMs; front-end and real yields fall, EUR softens on rate differentials and duration-sensitive risk catches a bid. This is the 2014-2019 ECB NIRP playbook taken to an extreme, when negative rates squeezed European bank profitability for years. Trade is steepeners and long duration; the bank-equity damage from NIM compression is the cleaner short than the broad risk-on tag suggests.
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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 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. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-on shock. A deflationary bust forces the ECB to cut to minus-1%, reviving tiering schemes and squeezing bank net-interest margins. The trigger decomposes into signed root‑shocks — Fed policy path ▼ · Recession signal ▲ — which propagate through our causal graph to the markets below.