What if JGB futures dislocate from cash and break hedging effectiveness for banks and life insurers?
JGB futures dislocate from the cash market amid forced deleveraging and thin liquidity, breaking hedging effectiveness for banks and life insurers and forcing the BoJ into emergency liquidity provision against collateral.
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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. JGB futures dislocate from the cash market amid forced deleveraging and thin liquidity, breaking hedging effectiveness for banks and life insurers and forcing the BoJ into emergency liquidity provision against collateral. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Real yields ▲ · Risk-parity deleveraging ▲ — which propagate through our causal graph to the markets below.