It is no secret that US President Donald Trump's prolific use of Twitter over the past couple of years has created massive volatility on financial markets.

Key points: The 'Volfefe' index measures the impact of Mr Trump's tweets on the US bond market

The 'Volfefe' index measures the impact of Mr Trump's tweets on the US bond market Many of Mr Trump's "market-moving" tweets tend to happen between 12-2pm (local time)

Many of Mr Trump's "market-moving" tweets tend to happen between 12-2pm (local time) Those tweets tend to be less "well-received", liked or retweeted by his followers

To measure how much impact Mr Trump's unpredictable tweets have on US interest rates, investment bank JP Morgan has created the "Volfefe index".

"Volfefe" is a conflation of two words, "volatility" and "covfefe" — a mysterious word coined by the US President (widely considered to be a "typo") in an unfinished tweet that went viral in 2017.

JP Morgan used its own volatility model and machine learning techniques to study how Mr Trump's 280-character posts have caused US Treasury yields (or government bond interest rates) to either surge or plunge.

The bank's analysts found that 146 out of his roughly 4,000 tweets (excluding retweets), since early-2018, can explain a "measurable fraction of moves" on shorter-term two, five and 10-year bond interest rates.

The tweet made a huge splash before later being deleted. ( Twitter: @realDonaldTrump )

What to look for in Trump tweets

There were some keywords which appeared more frequently in the volatility-inducing tweets by Mr Trump.

They include "China", "billion", "products", "Democrats", "great", "dollars", "tariffs" and "trade".

JP Morgan noted the President's tweets "can and will arrive at any hour of the day".

But analysts found the majority of his market-moving tweets were more likely to be published between midday and 2:00pm (local time) — which is 2:00 to 4:00am (AEST) — in the middle of Wall Street's trading session.

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To be even more precise, "a 1pm tweet is roughly three times as likely as one arriving at any hour of the afternoon or evening", the analysts found.

"Activity persists well into late evening, with 3am tweets more common than 3pm — a nuisance for rates markets, as market depth tends to be quite thin during the overnight session.

They also observed that Mr Trump hardly tweets between 5am and 10am (local time), which suggests he is likely to be sleeping during that five-hour period.

"Market-moving tweets exhibit distinct statistical properties, primarily addressing trade and, more recently, monetary policy," JP Morgan analyst Munier Salem wrote in his report.

"In recent months, these tweets also tend to receive fewer likes and retweets than other contemporaneous remarks."

They defined "market-moving" as tweets that were "immediately followed by a substantial move" in US bond yields.

The "Volfefe" index estimates the market moving potential of @realDonaldTrump tweets and has risen sharply recently. ( Supplied: J.P. Morgan )

JP Morgan is not the only bank to measure Mr Trump's effect on the market.

Earlier in the year, Citi created a "Trump Tweet Tracker" which tracked how the President's tweets about the US-China trade war affected the S&P 500 and Shanghai Composite.

It showed both share indices dropping sharply when he tweeted on December 5: "We are either going to have a REAL DEAL with China, or no deal at all".

However, US and Chinese markets reversed course, and skyrocketed when he changed his mind one month later, tweeting: "Talks with China are going very well!"

The Trump Tweet Tracker is in the red again for negative comments about China and trade ( Source: Citi Research )

Fighting the trade war via Twitter

While JP Morgan's research was limited to the US bond market, the bank said it is "easily transferable" to stock and currency markets.

They also said the President has been tweeting a lot more frequently since late-2018.

"The highest volume of tweets over the past four years has in fact come in recent months, though a substantial fraction of this rise in activity comes from an increased propensity to retweet others," Mr Salem said.

In early-August, Wall Street plunged (one of the many occasions it did so recently) when Mr Trump decided to ramp up his trade dispute with China.

He announced, over Twitter, that the US would impose a 10 per cent tariff on $US300 billion worth of Chinese imports.



On the flipside, markets surged in mid-June, when Mr Trump tweeted that he "had a very good telephone conversation with President Xi of China".

That tweet was posted one week before the G20 summit in Japan, when investors' excitement was at fever-pitch that the economically-damaging trade war would be over soon.

The President also frequently uses Twitter to insult the independent US Federal Reserve and its chairman Jerome Powell for not cutting interest rates aggressively enough to weaken the US dollar.

On August 15, he tweeted: "Our problem is with the Fed. Raised [interest rates] too much & too fast ... as other countries say THANK YOU to clueless Jay Powell and the Federal Reserve".

One week later, it was followed by one of his more controversial posts, impugning the loyalty of his hand-picked Fed chief.