What if overnight repo rates spike to 10%?
Quarter-end balance-sheet constraints plus heavy UST settlement pushing overnight repo to 10% forces an emergency Fed facility surge — a funding squeeze with modest HY/financials and crypto-liquidity spillover, not a solvency event. Direct analogue is Sept 2019, when repo hit ~10% and the Fed restarted bill purchases and repos. Dealers fund inventory in repo; a spike taxes leverage and money-market arbitrage. Forward angle: the SRF makes a repeat self-limiting — treat the spike as a buy-the-dip in funding-sensitive names once the Fed backstop prints.
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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. Quarter-end balance-sheet constraints collide with heavy Treasury settlement, sending overnight repo to 10% and forcing an emergency Fed standing-facility surge. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ — which propagate through our causal graph to the markets below.