Today's bond market rally masqueraded as a "tradeflow move" surrounding the NYSE Open. We know that ETF trading has been increasingly important for bonds over the past year, and we can often see this in the form of sharper movement surrounding the 9:30am time frame. At first glance, that seemed to be the only game in town this morning.
While tradeflows were generally favoring bonds at the expense of stocks, the biggest surges in volume lined up with specific headlines concerning North Korea's nuclear threats. Shortly after the NYSE open, a newswire hit suggesting that North Korea vowed to "wipe out" South Korea and the U.S. with a preemptive nuclear strike. This is nothing new from North Korea, and as such, it didn't elicit an extreme response from markets. In fact, until that point it wasn't clearly in the running for "market mover of the day."
It wasn't until a White House press briefing that markets clearly responded. Sean Spicer said "North Korea is looking for trouble. If China decides to help, that would be great. If not, we will solve the problem without them! U.S.A.," and that the US wouldn't telegraph its moves in advance. With that, stocks and bonds put in their highest volumes of the day and their most overt move into "risk-off" territory. All of the above was confirmed by a break below 110.00 in Yen/$--a level we'd been watching as indicative of a shift in the risk-off trade since last week.
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