Macro/China Stimulus Pivot/Market Detail

Will US HY credit spreads widen above 350bp by September 2026?

activeFinancial ConditionsResolves: October 15, 2026

The Condition

PBOC + State Council announce consumer-facing stimulus exceeding 2% of GDP by end of Q3 2026

External probability: 15.0%Source: Runchey Research meta-synthesis (midpoint of 10-25% range)Resolves: September 30, 2026

Our Ensemble Estimates

If condition is true

18%

Model agreement: 90%

Given demand pivot: Will US HY credit spreads widen above 350bp by September 2026?

If condition is false

10%

Model agreement: 97%

Given no demand pivot: Will US HY credit spreads widen above 350bp by September 2026?

Causal Effect

+8pp(positive)

Demand-side pivot worth ~8pp to HY spreads widening above 350bp, via removal of deflationary tailwind that keeps conditions loose

Unconditional probability:11.2%(blended: P(Y|T) × 15.0% + P(Y|F) × 85.0%)

Why This Matters

Tests whether a China demand-side pivot tightens global financial conditions through the removal of deflationary tailwinds. The financial-conditions lens found NFCI at -0.568 (loosest in dataset) with ~60% attribution to China's PPI deflation channel. The core paradox: a demand-side pivot would moderate overcapacity, ease PPI deflation, raise export prices, and remove the deflationary anchor that keeps conditions 150-200bp looser than the Fed's rate implies. HY spreads (currently 288bp, 43rd percentile) would be the first credit market signal of this tightening.

Resolution Criteria

ICE BofA US High Yield OAS (FRED BAMLH0A0HYM2) exceeds 350 basis points for any daily reading through September 30, 2026

Source: ICE BofA / FRED series BAMLH0A0HYM2Date: October 15, 2026

Source Analysis

HY spreads widening above 315bp (75th percentile) signals risk appetite deteriorating from China demand uncertainty

Financial ConditionsFINANCIAL_CONDITIONSPriority: HIGH

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