---
session_id: 2026-10-11-block-035-resume
date: 2026-10-11
block: 035
block_name: Credit ETF flows
phase: Phase 1 (Credit)
status: ◐ in-progress (partial — ended early by user)
---

# 2026-10-11 — Block 035 session state

## Done this session

1. **Cold-recall re-probes on Block 034 cards: 5/5 Working+, no demotions, no re-drills queued.** Blocks 034 substrate locked. Gaps flagged inline and closed in-session (each probe scored, then card substrate restated): impulse=survival-price-vs-flow split; fast-turn 4-ingredient sequence (missed: low base + mechanical index rebalance); SLOOS direction-before-index + DRTSCILM/DRTSCIS; growth-scare crossover tell (dispersion + SLOOS tightening same quarter BEFORE index moves); live-config "confirming-with-caveat" 3-part structure.
2. **Live verification before teach (issuer pages, teach-first convention):** HYG $17.59B AUM (Oct 9), prem/disc +0.26% (iShares official); JNK $5.84B AUM (Oct 8), +0.17% to INAV (SSGA official). Normal-state basis ~0.1-0.3% both. Flow read flagged for live probe: JNK bled ~$6.6B→$5.8B Aug→Oct while HYG flat — use in live-data probe.
3. **Teach delivered (4 concepts):** creation/redemption (AP in-kind wrapper, why price tracks NAV, fund-vs-AP division of labor); NAV basis + liquidity mismatch (two prices, basis = real-time price discovery in HY, APs stop creating in stress); flow-driven dislocation (flows transmit equity-speed liquidity into bond-market pressure; basis vs ETF-price diagnostic); March 2020 anchor (HYG discount ~5%+ at worst vs +0.2-0.3% today; Fed secondary-market ETF purchases closed it — order-of-magnitude only, flagged).

## Where it stopped

**Applied transition probe 1 of 4 POSED, UNANSWERED:** HYG at −3% discount on a disorderly tape — is the ETF mispriced or telling you something the NAV can't; what does the discount say about the underlying bond market that neither price alone does. (Answer per teach: ETF is the real-time price discovery; discount = sellers can't reach the bonds / cash market frozen, not a wrapper pricing error.)

## Resume protocol (next session)

1. Re-pose transition probe 1 as-is (it was never answered — re-delivery cost is one turn).
2. Remaining transition probes 2-4, then main material concepts (a)-(d) applied form: creation/redemption walk, basis/liquidity mismatch, flow dislocation + March 2020, live probe (HYG/JNK basis + JNK outflow vs Block 033/034 loaded-dispersion backdrop).
3. Close: cards for Block 035 (push + sync same session), session close file.

## Carry-forwards (unchanged)

- Dispersion-threshold candidate (1500+ CCC−BB) unanchored — third+ block running; schedule historical-distribution anchor at Block 037 verification.
- ISM removed from FRED — equity cross-checks use SP500.
- Next-block substrate scope (Block 036 per curriculum, teach-first): name + verify sources at this block's close.