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Bond Report: Treasury yields drop sharply as Russia mounts full-fledged attack on Ukraine


U.S. Treasury yields fell sharply Thursday as investors sought safety in government debt as Russian troops and tanks pushed into Ukraine and explosions rocked the country’s capital and other cities.

What are yields doing?

The yield on the 10-year Treasury note

tumbled to 1.866%, compared with 1.976% at 3 p.m. Eastern on Wednesday.

The 2-year Treasury yield

fell to 1.484% from 1.598% on Wednesday afternoon.

The yield on the 30-year Treasury bond

declined to 2.172% versus 2.274% late Wednesday.

What’s driving the market?

Investors piled into traditional havens, including government bonds and gold
as global equities plunged in reaction to the invasion. Futures pointed to sharp losses for U.S. stocks, with futures

on the Dow Jones Industrial Average

down more than 700 points, or 2.3%, while futures

on the S&P 500

dropped 2.2%.

Oil prices soared to levels last seen in 2014 and remained up more than 7%, with the U.S. benchmark

briefly trading above the $100-a-barrel threshold. Brent crude
the global benchmark, was up 7.2% at $101.31 a barrel.

The attack began early Thursday in Ukraine as Russian President Vladimir Putin said he had ordered military operations, brushing aside Western sanctions and warning other countries that any attempt to interfere would lead to “consequences you have never seen.”

U.S. President Joe Biden promised a new round of sanctions. Leaders of the Group of Seven nations were set to meet Thursday morning to discuss further punitive measures against Moscow.

Surging prices for oil and other commodities as a result of the conflict were seen stoking fears of stagflation — a combination of persistent inflation and slowing economic growth — potentially complicating the path for the Federal Reserve as it prepares to begin lifting interest rates as early as next month.

Upcoming economic data include weekly jobless claims at 8:30 a.m. Eastern and, separately, a revised look at fourth-quarter gross domestic product. A report on January new home sales is due at 10 a.m.

What do analysts say?

“Policy makers will be weighing the upside risks to inflation against the downside risks to activity. The conflict will not derail plans for policy tightening this year, but the events of the past 24 hours have tipped the balance towards erring on the side of caution,” wrote economists at Capital Economics, in a note. “The risks are greatest for the euro zone because of its closer ties to Russia.”

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