1. China 3-year corporate bond yield vs PPI-CPI average

This is a “Pulp Fiction” foreign exchange market. I’m referring to the scene where Bruce Willis riddles John Travolta with a submachine gun after the toaster startles him.

North Korea shoots a missile over Japan, and the yen rises. Japanese stocks (measured by the broader TOPIX) are actually up overnight in dollar terms. Meanwhile the euro jumps right through the important 1.20 technical boundary, and German stocks tank.

The DAX is down 1.7% at 7:30 a.m. EST, the worst performer among major indices. The dollar is the day’s big loser, down by identical amounts against EUR, JPY and gold. The dollar may not be a safe haven but dollar bonds are: the 30-year US Treasury bond rose nearly a percentage point.

What Asia Unhedged learns from all of this is that any shock to the market will push prices in the direction that they want to go anyway. The Euro is going to rise eventually when the European Central Bank gets rid of negative interest rates. It costs money to short the Euro in terms of carry, so there’s a trade-off between missing out on the trade and paying too much to be in it. When that pop-tart comes flying out of the toaster, everyone does what they were going to do anyway.