For bond bears like myself, today was an ugly day. Fixed income prices ripped higher, egged on by continued escalations of the North Korea situation with an added dose of poor economic reports for good measure. Some dovish Fed talk was the icing on the cake, and there was no mercy shown for bond shorts.

Although I am licking my wounds, the hedge fund community is relatively well positioned for this move.

The long end of the bond futures curve has rather large net long speculative positions.

Hedgies and other speculators have more than 284,000 net contracts of 10-year futures.

And they are net long 56,500 of the longer dated contract.

So yeah, I am probably the only putz that wasn’t rooting for bonds to continue screaming upwards today.

And I have to admit, technically, the chart looks great.

Notes are breaking out, and it’s tough to come up with a reason to sell ‘em.

But let me give it a try (and I realize this sounds suspiciously like I am defending a losing position. Point taken, and if you want to ignore the rest of my entry, I completely understand.)

The investing community is piling into fixed income on a flight-to-safety bid due to the North Korea tensions. Ironically, as tensions heat up, the Japanese Yen rallies as it is a funding currency, and the unwinding of carry trades causes Japanese currency strength.

The Yen’s movements have been tracking the US 10 year yield almost tick for tick recently.

It seems crazy that the country which North Korean is lobbing missiles over is experiencing currency appreciation, but there’s no sense arguing with the market – it is what it is.

Therefore, if you believe the North Korean situation will escalate from here, then, by all means, load up on treasuries. That’s the right trade. Yet, I just don’t see war breaking out, and I suspect North Korea will slip off the front page before you know it. There are no real military options, so the idea of Trump and the rest of the world doing anything more than increasing sanctions is a non-starter. Kim Junior will keep testing his missiles, Trump will keep warning him that he will face severe consequences, and nothing will change.