We've seen it before and we'll likely see it again.  Bond markets (and most other markets, for that matter) respond quickly to some unexpected headline, moving to levels they otherwise may not have seen, thus testing the boundaries of whatever range we're following at the time.  We then wonder if the move constitutes an official break of the range.  Shortly thereafter, markets begin unwinding the initial move and return within the confines of recent ranges.

That's the long and the short of the bond market story over the past 2 days following the North Korea missile headlines from Monday afternoon.  In general, markets moved "risk-off" starting on Monday night.  European markets added to the momentum like a flare-up that chokes the underlying fire.  Ever since then, all of the "risk-off" movement has been heading back in the other direction.

In the chart above, it's notable that bond yields certainly haven't been nearly as eager to unwind their North Korea reaction compared to stocks and $/Yen.  The biggest risk is that this is purely a factor of month-end bond-buying (compulsory trades among money managers who are required to hold a certain mix of bonds by the end of the month) and that bonds will be predisposed to continue selling at the beginning of September. 

For now, we can keep an eye on the same 2.16% technical level that we had been watching as a floor before the Korea-related volatility.  Granted, yields are pretty close already (in the 2.14's this morning), but we'll cross that bridge when/if we come to it.  We've certainly seen far more disconcerting bounces in similar situations.