What if the private-equity buyout model breaks under high rates?
If sustained high rates break the LBO model, the transmission is credit-led: HY widens, financials lag and risk-off bleeds into high-beta crypto/equity. Closest rhyme is the 2007-08 LBO-debt logjam (hung bridge loans) more than a vol event. Forward angle: PE's pivot to NAV loans, continuation funds and dividend recaps has pushed leverage into opaquer corners, so the break shows up as frozen exits/DPI drought before it ever prints in liquid spreads, the COVID analogues miss this slow-grind path.
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 1–3 years 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. The leveraged-buyout / private-equity model breaks under sustained high rates. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.