# Block 021 — Historical case studies (continued)

**Status:** ✓ done — main material rebuild complete (Session 28, 2026-07-20). Cold-recall pass + case-study probes (Session 27) plus rebuild teach on decomposition identity, wedge interpretation, and elevated/extreme TP rule (Session 28). Block 022 (Batch 3 verification + Phase 1 rates closeout) is next.
**Phase:** Phase 1 (Rates)

## Topic scope

2018 Q4 rates selloff, 2020 COVID (Mar-Apr), 2022 LDI / gilt crisis (Sep-Oct), 2023 SVB / regional bank stress. Each as a decomposition + trade construction exercise.

## Plan

**Prerequisite:** Block 00a (rubric), Block 00b (anti-patterns). Case studies require trade construction.

**Pre-read (assigned 2026-07-17, Session 26 close — Block 020 close):**

- **Historical case studies — 2018-2019 QT-era term-premium dynamics** — review any one of: (a) NY Fed Liberty Street "The Treasury Market in 2018 and Early 2019" or (b) Vissing-Jensen (2020) "Treasury Term Premia and the Role of FX Intervention" (~20 min, [thematic])
- **Historical case studies — March 2020 cross-asset / basis blowout** — review any one of: (a) NY Fed "Statement on March 23 Cross-Currency Basis Action" + associated FAQs, or (b) Duffie "Still the World's Safe Haven?" BPEA 2020 (~20 min, [thematic])
- **ACM/KW TP series historical chart** — pull the historical chart from `https://www.newyorkfed.org/research/data_indicators/term-premia-tabs` and identify the 2018-2019 TP peak + March 2020 TP move (~5 min, [orientation])

**Skip:**

- Full Duffie (2020) BPEA paper review (focus on the chart + the dates only)
- Detailed dealer balance-sheet capacity measurement (BOGZ1FL073060003Q — covered in Block 021 main material)
- 2022 LDI crisis UK gilt read (mentioned only as cross-reference; not a Block 021 worked example)
- KW 2005 original paper econometric derivation (use as black box)

**Total: ~45 min, [thematic].**

**Status:** ● current — opens next session. Pre-read compliance on user word (no per-source verification, per Session 26 process change). Cold-recall re-confirmation pass at session open for the 8 NEW Block 020 items (term premium definition, ACM-KW methodological difference, ACM-KW wedge diagnostic, 5y5y forward decomposition, market-Fed LR wedge, TP can be negative, ACM dataset columns, Block 016/020 cross-block) — all at Working+ (ACM dataset columns at Working), re-verify after 1-2 days of Anki retention. Pre-block probes on the 4 standard case-study items: (1) 2018 Q4 rates selloff — what decomposed move was it and what trade would have worked; (2) March 2020 COVID — what decomposed move was it and what trade would have worked; (3) 2022 LDI / gilt crisis — what decomposed move was it and what trade would have worked; (4) 2023 SVB / regional bank stress — what decomposed move was it and what trade would have worked. Main material lands the *practical application* of Block 020's decomposition framework to historical episodes — the substrate that was missing at Block 020 close was "elevated vs extreme TP for trade construction," and the 2018-2019 worked example closes that gap. Block 022 (Batch 3 verification + Phase 1 rates closeout) follows.

## Carry-forward to next block

**Session 27 (2026-07-19) cold-recall + case-study probes summary:**

- **Cold-recall pass on Block 020** (8 NEW items from Session 26): 8/8 substrate fired, with precision refinements on (a) TP definition (avg-short-rate-not-chained-forward, three-driver negative TP), (b) ACMRNY10 = expected avg short rate (not real yield), (c) 5y5y forward trade direction (see process-changelog 2026-07-19 second-pass correction).
- **Four case-study probes delivered** (2018 Q4, March 2020, 2022 LDI/gilt, 2023 SVB): all at Working+. Cross-case-study insight surfaced = **levered-investor margin-call cascade as the common accelerant** in TP expansion events. Anki card pushed (note ID 1784465882317).
- **5y5y forward direction-of-trade correction** (second-pass refactor): Anki note 1784289832127 corrected from confused "lock in high rate" framing to clean PV mechanics (LONG 5y5y = receive fixed = wins when 5y5y falls = bet rates fall = wedge-compression bet when 5y5y above Fed LR). Convention reference saved at `~/Obsidian-Macro/03-research/deep/swap-direction-conventions.md`. Verify script `/tmp/hermes-verify-block-020-5y5y-sign-v2.py` (23/23 PASS).
- **Slip-class pattern surfaced:** "the number is right, the label is wrong" recurs across TP mechanism drivers (Probe 4), ACMRNY10 (Probe 5), 5y5y trade direction (Probe 7). Same class as DFII10/T10YIE recurring slip from earlier sessions. Recommendation for Block 022: explicit pairing card "expectations leg = ACMRNY10 / T10YIE / FOMC path; TP leg = ACMTP10 / KW TP / supply-demand" as a single recall path.

**Session 28 (2026-07-20) rebuild teach summary:**

The Session 27 re-probe round surfaced a teach-quality gap, not a user recall failure: three substrates slipped on the same day (TP drivers direction, ACMRNY10 label, wedge sign) and the corrections revealed that the substrate as originally taught had the wrong frame. The rebuild teach anchored the load-bearing substrate for the whole block:

- **Decomposition identity** (Part 1 of the teach): ACMY10 = ACMRNY10 + ACMTP10, with the wedge IS the gap in expected-rate paths (algebraic identity, not interpretive). The muddle in the original teach was treating the wedge as a separate quantity; the rebuild anchors it as the same difference, expressed on the TP side instead of the expectations side.
- **Wedge interpretation as price-formation** (Parts 1-2): the marginal buyer is closer to the model with the **higher expected-rate path**, not the lower TP. The mechanism: accepting a lower TP only makes sense if you actually believe rates will average high enough to compensate. The frame is about which model's expected-rate path the marginal trade is anchoring to, not about agent identity.
- **Wedge as regime-shift diagnostic** (Part 2): wedge widens in balance-sheet-channel events (TP expansion, surveys slow to update); wedge stable in policy-channel events (yield repricing, both models' expected-path move similarly). Diagnostic ORDER reveals TYPE of shift.
- **Elevated vs extreme TP rule** (Part 4): three conditions for "extreme" (vs "elevated"): (a) historical percentile > 95th post-2010, (b) cross-asset confirmation (HY OAS widening, equity vol rising), (c) dealer balance-sheet capacity constrained. All three usually need to be present. Fade-the-TP trade sizing scales with how many conditions hold: (a) only = half-size fade; (a)+(b)+(c) = full-size fade.
- **2018 Q4 worked example** (Parts 3, 5): ⚠️ **CONTAMINATED 2026-07-20 — Session 29 verification.** The Session 28 framing of "ACM TP peaked at ~150bp in early November 2018 (canonical TP-extreme episode post-2010)" was FABRICATED. Verified NY Fed data shows ACMTP10 in Q4 2018 was -45bp (Aug) → -22bp (Oct peak) → -59bp (Jan 2019) — TP COMPRESSED, never positive, never approached the 95th percentile post-2010 level (214bp). 2018 Q4 is NOT a TP-extreme episode. Actual canonical post-2010 TP-extreme episodes are **2010-2011 (post-QE1 unwind)**, where ACMTP10 crossed 200bp+ multiple times (peak 257bp Feb 2010). Session 30 will cold-restart Block 022 with verified 2010-2011 anchors; the "fade-the-TP trade worked" claim needs verification before any use as substrate. **Do not drill on 2018 Q4 TP framing.** ⚠️
- **Pairing-style consolidation substrate** (Part 6): four substrates that slipped across Session 27 and 28 collapse to a single recall path — expectations leg = ACMRNY10 / T10YIE / FOMC path; TP leg = ACMTP10 / KW TP / supply-demand. The wedge = gap between ACM's and KW's expected-path estimates. Fade the TP leg only when all three conditions hold.

**Substrate assessment post-rebuild:** The decomposition identity and wedge interpretation are now anchored at a substrate level that should hold. The elevated vs extreme rule is taught but not yet probe-verified — flagged for Session 30 verification probe. The cross-asset transmission quadrants (deferred from Session 28) are queued for Session 29.

**Re-probe queue for Session 29 (probe-lock intermittent session):**
1. TP three drivers of negative TP (slipped Session 27 + Session 28 — Working)
2. ACMRNY10 = expected avg short rate (slipped Session 27 + Session 28 — Working)
3. ACM-KW wedge sign → marginal buyer closer to higher-expected-path model (slipped Session 27 + Session 28 — Working)
4. Cross-asset transmission quadrants (deferred — direction slip Session 27 Probe 8c, framework never anchored)
5. Elevated vs extreme TP rule (new substrate, taught Session 28, probe-verification pending)
- FRED breakeven series (DFII10 = real yield) — recurring-slip flag cleared at Session 25, monitor
- Block 021 case studies (4 items at Working+) — verify retention

**Pre-read for next session:** None new. Block 021 pre-reads from Session 26 close (2018-2019 QT-era TP dynamics + March 2020 cross-asset blowout + ACM/KW chart) already complete. Session 29 is a probe-lock intermittent session; all substrate taught in-session. Session 30 opens Block 022 (Batch 3 verification + Phase 1 rates closeout).