Breakthrough: North Korea Ready To Denuclearize “If Regime Safety Is Guaranteed”

Score another diplomatic victory for Trump, whose hard line negotiating tactic appears to have generated a dramatic – and favorable for market – outcome. Moments ago futures spiked, 10Y yields jumped and the USDJPY bounced about 106 on the flashing “bullish” news headline that North Korea is “ready to denuclearize if regime safety is assured.”

  • NKOREA OPEN TO DENUCLEARIZE IF REGIME SAFETY GUARANTEED: SKOREA

The headlines come from South Korean National Security Office special envoy Chung Eui-yong, who is speaking to reporters in Seoul after returning from Pyongyang. Remember he and another envoy, National Intelligence Service chief Suh Hoon met North Korean leader Kim Jong Un in Pyongyang on Monday. Chung confirms that North Korea is indeed ready to stop the jawboning and negotiate:

  • Kim Jong Un open to frank talks with U.S. for denuclearization: Chung
  • North Korea to suspend provocations during talks: Chung
  • Promises not to use any weapons against South Korea: Chung

Next step: a summit in April between the two neighbors where details will be ironed out: “North Korea, South Korea agree to hold summit in April”, Chung says.

The easing of tensions between the two Koreas and this clearly positive geopolitical development has triggered a broad based risk-on move. Fixed income is selling off sharply here, with Bunds flying. As the spot KRW market is closed, the NDF space is in focus. The 1m NDF has traded from 1076.0 to 1070.8 at time of print. USDJPY is spiking higher at 106.10 at print. This move may have legs especially as early NY begins to come in

The question now is whether this unexpected diplomatic victory for Trump will further empower him to demand similar concessions on the trade side, and launch the “trade wars”, even as the market is now fully convinced that the US president will backtrack.



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Breakthrough: North Korea Ready To Denuclearize “If Regime Safety Is Guaranteed”