What if Inflation-surprise outflow shock unwinds crowded EM local-bond longs?
An upside EM inflation surprise forces foreigners to dump local bonds, spiking yields and depreciating currencies as the disinflation trade is unwound abruptly.
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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. An upside EM inflation surprise forces foreigners to dump local bonds, spiking yields and depreciating currencies as the disinflation trade is unwound abruptly. The trigger decomposes into signed root‑shocks — EM currencies ▼ · FX carry appetite ▼ · Credit spreads ▲ · Inflation surprise ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.