What if a public power authority defaults on its debt?
A public-power-authority default jolts the muni-bond market; the clean trade is wider muni and HY credit plus financials with municipal exposure. Direct rhyme is 2013 Puerto Rico's power authority (PREPA) distress and Detroit, which repriced muni risk premia. Transmission: contagion to similarly leveraged G.O./revenue issuers, higher new-issue yields. Forward angle: a single-name muni default rarely turns systemic given the market's segmentation, so size for a spread-widening, not a 2008-style freeze despite the Lehman analogue.
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. A debt-laden public power authority defaults, jolting the municipal-bond market and stranding ratepayers. The trigger decomposes into signed root‑shocks — Credit spreads ▲ — 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 | High-yield credit HYG 📈 chart | Rate | ▼ -0.5% hist -0.7–+0.01% · other way -0.25% (n=12) |
| 2 | Financials XLF 📈 chart | Equity | ▼ -0.3% hist -0.22–-0.1% · other way +0.3% (n=12) |
| 3 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -0.3% hist -3.17–+0.94% · other way +26.94% (n=12) |
| 4 | JPMorgan JPM 📈 chart | Equity | ▼ -0.3% hist -0.27–+0.14% · other way +2.37% (n=12) |
| 5 | Volatility (VIX) VIXon Hyperliquid 📈 chart | Vol | ▲ +0.2% hist -2.08–+5.24% · other way -2.6% (n=12) |
| 6 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.2% hist -0.2–-0.02% · other way -0.69% (n=12) |
| 7 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -0.2% hist -3.54–+0.81% · other way +6.02% (n=11) |
Probable recommendation
Historical precedent — what analogous events actually did
Across 40 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 |
|---|---|---|---|---|---|---|
| Bitcoin BTC | SHORT | -3.0% · 5d -2.1% | 70% | 19 | 0.30 | ✓ matches cascade |
| High-yield credit HYG | SHORT | -0.4% · 5d -0.0% | 64% | 33 | 0.23 | ✓ matches cascade |
| MSTR MSTR | SHORT | -2.8% · 5d -2.9% | 60% | 37 | 0.17 | ✓ matches cascade |
| Gold XAU | LONG | +0.6% · 5d +0.1% | 57% | 37 | 0.13 | · |
| 10y yield DGS10 | SHORT | -11bp · 5d -4bp | 57% | 40 | 0.12 | · |
| Volatility VIX | LONG | +4.9% · 5d +1.2% | 55% | 38 | 0.09 | ✓ matches cascade |
| US dollar DXY | LONG | +0.3% · 5d +0.1% | 55% | 40 | 0.08 | · |
| XLF XLF | LONG | +0.0% · 5d -1.0% ↺ fades | 49% | 37 | 0.00 | ⚠ differs |
| JPM JPM | LONG | +0.3% · 5d -1.4% ↺ fades | 41% | 40 | 0.00 | ⚠ differs |
| SPX SPX | SHORT | -0.1% · 5d +0.1% ↺ fades | 39% | 40 | 0.00 | ✓ matches cascade |
Why this probability
Public power authority default jolting muni market is rare; sector mostly stable mid-2026. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.