Financial analysts suggest buying German Bunds in case of nuclear war

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Financial analysts are putting their heads together to predict how nuclear war would affect the markets — you know, just in case. “The market’s view is likely too sanguine in short term,” analysts at Citi told The Wall Street Journal. “This reflects investors’ experience that geopolitical rhetoric can quieten as quickly as it escalates, and a pervasive belief that the true risk of military confrontation is minimal.”

But if there is all-out war with North Korea, for example, The Wall Street Journal also has some tips:

Some of the normal rules of markets — when trouble is stirring, buy yen — don’t really apply, given Japan’s proximity to North Korea’s missiles. Nonetheless, the Japanese yen has appreciated 1.4 percent against the dollar this week.

“There is no safe-haven in Japan in case of a conflict with North Korea,” say Commerzbank analysts. “Only in the minds of the global FX traders.”

Still, Nordea analysts suggest that German bunds, the perennial refuge of panicked investors, would be good to own during a nuclear conflict too, with aggressive buying pushing the spread between German two and 10-year bunds to 0.5 percentage point, from above one percentage point now. [The Wall Street Journal]

President Trump tweeted Friday that “military solutions” for dealing with North Korea are “locked and loaded,” with the stock market reflecting people’s nerves. Wall Street’s so-called “fear gauge,” the Chicago Board Options Exchange Volatility Index, jumped from historic lows up 44 percent on Thursday, The New York Times adds.



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