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.
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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 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. Loading the probability audit trail…
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.