What if Germany scraps its debt brake entirely?
Scrapping the debt brake for general spending floods Bund supply and lifts the 10y above 3.5% — the clean trade is short Bunds/long German defense and industrial beneficiaries, which the Lockheed/Northrop bid captures. Rhymes with the March 2025 debt-brake reform for defense/infrastructure that triggered the sharpest Bund selloff in decades and a defense-equity surge. Transmission: heavier issuance steepens the German curve and drags global duration; the euro firms on growth/rate-differential. Forward angle: full abolition beyond defense is a regime shift in European safe-asset supply, structurally cheapening Bunds rather than a one-off.
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 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. 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. Bundestag abolishes the Schuldenbremse for general spending beyond the defense carve-out; 10-year Bund yield spikes above 3.5%. The trigger decomposes into signed root‑shocks — Defense spending ▲ · Fed policy path ▲ · Growth surprise ▲ — 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 | ▲ +0.9% hist -0.31–+0.7% · other way +2.42% (n=12) |
| 2 | Northrop NOC 📈 chart | Equity | ▲ +0.8% hist -0.84–+0.62% · other way +4.57% (n=12) |
| 3 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -0.9% hist -3.98–+4.09% · other way -6.26% (n=11) |
| 4 | RTX RTXon Hyperliquid 📈 chart | Equity | ▲ +0.7% hist -0.19–+0.69% · other way +1.99% (n=12) |
| 5 | Solana SOLon Hyperliquid 📈 chart | Crypto | ▼ -0.6% hist -2.05–+0.86% · other way +2.48% (n=8) |
| 6 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -0.6% hist -0.56–-0.11% · other way +0.15% (n=12) |
| 7 | Tech sector XLK 📈 chart | Equity | ▼ -0.6% hist -0.52–-0.18% · other way -0.38% (n=11) |
| 8 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -0.5% hist -2.44–+1.44% · other way -4.96% (n=10) |
| 9 | Ether ETHon Hyperliquid 📈 chart | Crypto | ▼ -0.5% hist -1.68–+0.6% · other way -5.85% (n=9) |
| 10 | US dollar (DXY) DXYon Hyperliquid 📈 chart | FX | ▲ +0.4% hist +0.06–+0.34% · other way +0.47% (n=12) |
| 11 | Hyperliquid (HYPE) HYPEon Hyperliquid | Crypto | ▼ -0.4% model prior · unmeasured |
| 12 | 2y Treasury yield DGS2 | Rate | ▲ +4bp model prior · unmeasured |
| 13 | Gold XAUon Hyperliquid 📈 chart | Commodity | ▼ -0.4% hist -0.52–-0.01% · other way -0.73% (n=11) |
| 14 | 30y Treasury yield DGS30 📈 chart | Rate | ▲ +4bp hist -2.67–+17.16% · other way -3.4% (n=12) |
Probable recommendation
Why we may diverge from history
Trust the cascade short: HOOD/COIN +13.3%/+11.5% history is regime contamination from thin n=7 — Israel-strike/Operation-Sindoor windows printed +35-63% on the 2024-25 BTC bull, not because a Bund-yield spike helps high-beta crypto.
Historical precedent — what analogous events actually did
Across 20 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 | +13.2% · 5d +3.0% | 86% | 7 | 0.63 | ⚠ differs |
| USDJPY USDJPY | LONG | +1.1% · 5d +0.7% | 79% | 14 | 0.54 | ✓ matches cascade |
| COIN COIN | LONG | +11.5% · 5d +3.9% | 86% | 7 | 0.51 | ⚠ differs |
| XHB XHB | SHORT | -2.0% · 5d -0.2% | 80% | 10 | 0.41 | ✓ matches cascade |
| ETH ETH | SHORT | -1.4% · 5d -0.5% | 78% | 9 | 0.37 | ✓ matches cascade |
| 30y yield DGS30 | LONG | +13bp · 5d +11bp | 69% | 19 | 0.35 | ✓ matches cascade |
| 10y yield DGS10 | LONG | +14bp · 5d +13bp | 69% | 19 | 0.35 | ✓ matches cascade |
| KRW KRW | SHORT | -1.3% · 5d -1.0% | 70% | 10 | 0.34 | ✓ matches cascade |
| US dollar DXY | LONG | +0.1% · 5d +0.4% | 69% | 19 | 0.33 | ✓ matches cascade |
| AUD AUD | SHORT | -1.3% · 5d -0.4% | 70% | 10 | 0.31 | ✓ matches cascade |
| NOC NOC | SHORT | -1.1% · 5d +0.0% ↺ fades | 68% | 18 | 0.30 | ⚠ differs |
| EURUSD EURUSD | SHORT | -0.6% · 5d -0.2% | 70% | 10 | 0.29 | ✓ matches cascade |
| TRY TRY | SHORT | -0.7% · 5d +2.4% ↺ fades | 70% | 10 | 0.28 | ✓ matches cascade |
| High-yield credit HYG | SHORT | -0.8% · 5d -0.1% | 70% | 10 | 0.28 | ✓ matches cascade |
Why this probability
Debt-brake erosion underway post-defense carve-out; full abolition plus 3.5% Bund plausible over 18mo. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.