The spark jumped from the squib canister (which is connected to the rocket body) to either of the externally earthed wires inside the squib. The spark jumped inside the squib canister, igniting it. The rocket body was effectively earthed through the wires emanating from the squib.
The correct way to do this would have been to short the two squib connections with very short wires (THAT WERE BONDED TO THE ROCKET BODY ITSELF) within an inch or two of the squib canister. Then, the rocket body should have been separately bonded to earth, but not close to the squib.
That way, if the rocket body gets charged by triboelectric effects or a nearby lightening strike, the current flow is along the body of the rocket into the earth below it. The squib is in an equipotential zone on the rocket, with little or no potential gradient across the squib itself.