The Simulation Desk · agent-based scenario simulation · 2026-06-17
We stress-tested one scenario from the desk’s register with an ensemble of interacting simulated actors — institutions, intermediaries, policymakers and traders — and let them argue, trade and react over multiple rounds. What follows is what the simulation surfaced for the desk to investigate. It is calibration-gated: it carries 0 percentage points on every published probability (cap 5pp, Day 18). Probes, not predictions.
Scenario under test: Sovereign-debt sustainability & fiscal dominance
Desk thesis: Rising debt loads meeting still-high real rates push toward financial repression — quietly degrading the 'risk-free' rate permanent capital relies on.
Desk probability at run time: 34% — see the scenario register for the current number and model card.
What the simulation surfaced — probes for the desk
- Are weak G7 long-bond auctions (low bid-to-cover, widening tails) becoming a leading trigger for sovereign-debt-sustainability repricing rather than a lagging symptom?
- Is the risk-free rate ceasing to be a clean source of return for permanent capital where policy slides into financial repression or yield-curve control?
- Does rising long-end yields against a rising debt burden read as a real regime signal for long-horizon allocators, or as noise the desk should discount?
- How are sovereign wealth funds and public pensions repositioning duration, inflation linkers and real assets as fiscal dominance suppresses real returns on government debt?
- Is cross-owner coordination and information-sharing among the largest asset owners rising as a response to sovereign-debt stress, and does that shift market dynamics?
From the simulation record
In the simulated environment, the relationship between sovereign-debt sustainability and fiscal dominance became the binding constraint on long-horizon capital owners — sovereign wealth funds, public pensions, insurers and endowments. As fiscal-dominance policy tightened, the durability of sovereign debt drove investment decisions, and allocators were forced to respond flexibly within a shifting and uncertain policy regime.
Several market signals surfaced for the desk to investigate. The simulation flagged rising long-end yields against a rising debt burden as a weak signal; it noted that the risk-free rate may no longer be a clean source of return for permanent capital where policy produces financial repression or yield-curve control, suppressing real returns; and it identified poor G7 long-bond auctions as a potential trigger for sovereign-debt-sustainability concerns. In response, simulated owners leaned toward safer asset channels and toward greater information-sharing and cooperation with peers.
What this is — and is not
These are research prompts surfaced by a simulation, not facts and not published probabilities. Anything that survives the desk’s source-gated investigation shows up in the scenario’s model card with named sources; the rest is discarded.
Interrogate this scenario in the Scenario Lab → · Command Center · The Odds Board · How the simulation leg is governed