What if an unfunded UK budget triggers a gilt-downgrade shock?
A surprise unfunded UK fiscal package triggering a multi-notch downgrade and gilt selloff is the direct replay of the Sep-2022 Truss mini-budget, which gapped gilt yields ~100bp and forced BoE LDI intervention. The trade is short gilts/short GBP into the credibility loss, watching for pension-LDI forced selling as the accelerant. Forward angle: post-2022 LDI buffers are larger, so the same fiscal shock may transmit more through gilts and sterling than through a 2022-style margin spiral.
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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. A surprise unfunded UK fiscal package triggers a multi-notch downgrade and gilt selloff. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ — which propagate through our causal graph to the markets below.