What if a US 10-year Treasury auction fails to clear?
A genuinely failed 10y auction is a tail event that forces dealers to warehouse supply, spiking real yields and draining funding liquidity — duration assets and HY credit sell together as repo tightens. Closest analogue is the March 2020 'dash for cash' when even Treasuries sold off and the Fed had to backstop the market. The transmission is dealer balance-sheet and repo; the forward twist is that an actual fail likely triggers an SRF/standing-facility intervention within hours, so the violent move is short-lived but the vol is real.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
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 Tail risk 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 US 10-year auction fails to clear, forcing primary dealers to absorb unprecedented supply. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Real yields ▲ — which propagate through our causal graph to the markets below.