This week has admittedly been the same sort of summertime trading week that we've seen for most of July and August--perhaps even more so.  By that I mean that volumes and liquidity are low, thus allowing some market movers to have bigger effects than they otherwise might.

At other times, events that would normally move markets are overshadowed because a few big traders happen to be making compulsory trades.  In an illiquid environment, a few big compulsory trades can set the tone in a way that's not possible at other times of the year.

The most obvious market moving headline of the week has been the North Korea missile launch news.  If you ask stocks and Yen, markets are already over it.  Both have fully eclipsed pre-Korea levels.  But if you ask bond markets at home and abroad, there's still some reason to be trading in stronger territory vs pre-Korea levels. 

So who's lying?

Will bonds move back up toward the other metrics or vice versa?  Or how about a third option where this is simply one of the periodic divergences between normally correlated metrics.  The biggest risk is option 1, where bonds are held down right now by month-end trading.  While this morning's inflation data is ostensibly important, we won't really be able to get a final answer on the above questions until we see how things are trading tomorrow.