What if the pension-fund margin-call cascade of 2022 returns?
A sharp gilt selloff triggering LDI fire-sales is a self-reinforcing UK pension-margin spiral — long-gilt yields gap, GBP falls, sell UK financials; this is a gilt/sterling event, not the crypto-first move shown. Rhymes exactly with the Sept 2022 LDI doom loop that forced the BoE's emergency long-gilt purchases to halt collateral fire-sales. Transmission: UK DB pensions' levered LDI hedges are the conduit; forced selling begets more selling. Forward angle: post-2022 regulators raised LDI collateral buffers, so the threshold for a cascade is higher — but the tail, if breached, is just as violent.
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 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. Sharp gilt selloff triggers pension liability-driven-investment fire sales, echoing the 2022 doom loop. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.