What if a sponsored-repo netting failure freezes Treasury financing?
A clearing-member default cascading through FICC sponsored-repo netting freezes ~$1T of dealer Treasury financing — a core-plumbing seizure where the violent read is risk-parity/levered unwind, with SOL/ETH and HY leading lower and VIX spiking. Closest rhyme is the LTCM/2008 dealer-funding freezes. Sponsored repo is how money funds finance dealers' UST books; a netting break severs that pipe instantly. Forward angle: FICC's expanded central clearing concentrates this risk — the Fed would lend against collateral fast, but the intraday gap is where the fire-sale happens.
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 Tail risk 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. A clearing member's default at FICC's sponsored repo service cascades through netting, freezing $1T of overnight Treasury financing for dealers. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.