Treasury yields mostly lower amid intensifying Russia-Ukraine conflict

U.S. Treasury yields were slightly lower Thursday morning, despite the intensifying conflict between Russia and Ukraine.

The yield on the benchmark 10-year Treasury note fell about 1 basis point to 1.856% at 6:40 a.m. ET. The yield on the 30-year Treasury bond was little changed at 2.23%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

Yields have seen sharp falls since Russia invaded Ukraine on Feb. 24, with investors flocking to safe haven assets amid the uncertainty. On Wednesday, however, the 10-year Treasury yield saw its biggest one-day jump since 2020, rising 18 basis points, as investors ditched government bonds for risk assets like stocks.

Russia’s attack on Ukraine has now entered its second week. There were conflicting reports about which side controls the city of Kherson. Ukrainians still control the capital, Kyiv, despite Russian efforts to overtake the city. Port city Maripol and Kharkiv, Ukraine’s second-biggest city, experienced heavy shelling Wednesday.

Oil prices continue to be driven higher by the conflict. West Texas Intermediate crude futures, the U.S. oil benchmark, were up more than 3% to $114.09 a barrel in early trading on Thursday. Rising oil prices have sparked concerns that this could push headline inflation higher.

Federal Reserve Chairman Jerome Powell said in a congressional testimony on Wednesday that he still sees interest rate hikes ahead. However, he noted that the effects of the Russia-Ukraine conflict on the U.S. economy are “highly uncertain.”

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“We’re going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment,” he said under questioning from members of the House Committee on Financial Services.

“To the extent that inflation comes in higher or is more persistently high than that, we would be prepared to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings,” he added. Powell will testify again on Thursday before the Senate Banking Committee at 10 a.m. ET.

ADP also posted better-than-expected private payroll data on Wednesday, with 475,000 jobs added in February.

This comes ahead of the closely watched nonfarm payrolls report, due out on Friday morning. Economists are expecting 440,000 jobs to have been added during the month. January’s report showed an increase of 467,000.

The number of initial jobless claims filed last week is due out at 8:30 a.m. ET. Economists are forecasting a print of 225,000, according to estimates from Dow Jones.

Markit is set to release its final purchasing managers’ index for February at 9:45 a.m. ET. ISM’s non-manufacturing PMI data for February is then due out at 10 a.m. ET.

January’s factory orders data is slated for release at 10 a.m. ET. staff contributed to this market report.

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