At 05:41, the first overnight desk sent confirmation:
Two counterparties declined full rollover.
Not refusal.
Partial.
Partial refusals are more dangerous.
They signal caution without commitment.
Caution spreads faster than panic.
Liquidity utilization: 89%.
Buffers compressing.
Treasury initiated asset tranche three pre-market.
Selling into thin depth increases slippage.
Slippage widens spreads.
Wider spreads validate caution.
Loop tightening.
In physics, once a reaction exceeds equilibrium, output feeds itself:
Above unity, each event generates more than one subsequent event.
In finance:
One withdrawal triggers two hedges.
Two hedges trigger four liquidity pulls.
The multiplier is behavioral, not mechanical.
At 08:23, funding spread gapped 41 basis points on open.
No news release.
No downgrade.
Only collective anticipation.
Order book depth collapsed near top layers.
Liquidity curve steepened sharply:
As stress variable approached threshold, required liquidity approached infinity.
Not in reality.
But perception behaves asymptotically.
Participants rush before denominator reaches zero.
Han Zhe updated contagion model with live withdrawal velocity.
Time derivative positive and accelerating.
Second derivative no longer negligible.
Convex distress function confirmed.
He transmitted one sentence to Gu Chengyi:
"Reaction self-sustaining."
By 10:15, collateral haircuts adjusted intraday.
That was new.
Haircuts are rarely moved in real time.
Real-time adjustment signals distrust.
Distrust increases required collateral.
Higher collateral drains liquidity.
Drain increases visible strain.
Strain increases distrust.
Closed loop complete.
Regulatory liaison initiated inquiry call.
Tone neutral.
Questions precise.
"What is your projected liquidity coverage under 24-hour stress?"
When regulators call early,
they are measuring spillover risk.
Not your survival.
Systemic relevance magnifies scrutiny.
In networks, cascade depth depends on connectivity and threshold sensitivity.
If each node activates when two neighbors activate,
propagation resembles combinatorial growth:
Not linear.
Not gradual.
Explosive past tipping density.
By noon, equity price fell 18%.
Equity decline increases CDS spreads.
CDS widening increases funding costs.
Funding costs pressure liquidity.
Liquidity pressure reinforces equity decline.
Cross-market feedback engaged.
The energy firm's hedge portfolio expanded in valuation.
Protection legs deep in the money.
But leadership imposed constraint:
No active aggression.
Stability preferred over profit.
Convexity exists to absorb shock,
not amplify it.
At 14:42, a large clearing member required additional margin.
Immediate.
Payment executed.
Liquidity coverage fell to 82%.
Below internal red line.
Above regulatory minimum.
Technically compliant.
Functionally fragile.
Gu Chengyi addressed senior management:
"This is no longer about assets."
"It is about reaction velocity."
Slowing velocity requires external damping.
Internal reserves insufficient to alter perception trajectory.
At 16:55, central liquidity window mentioned informally.
Not activated.
But discussed.
Once such facilities are considered,
market assumes proximity to threshold.
Signal leakage inevitable.
Evening projections under current acceleration:
Runway: 19 hours.
If acceleration slows: 36.
If accelerates further: 12.
Confidence multiplier estimated at 1.07.
Marginally above unity.
But above.
Chain reactions do not ask permission.
They proceed until fuel exhausted—
Or moderator introduced.
Night settled over screens glowing red.
Liquidity not gone.
Capital not erased.
But reaction now independent.
Self-feeding.
And morning would reveal
Whether a moderator
Would appear—
Or whether heat
Would continue rising.