(Bloomberg) -- Treasuries staged a rapid u-turn Friday as concern about the geopolitical situation in Ukraine and Russia helped spur risk-aversion among investors, dragging down yields a day after hotter-than-expected inflation and bets on Federal Reserve policy hawkishness sent them soaring.
Treasuries quickly jumped to highs of the day while volumes spiked higher in 10-year note futures. U.S. National Security Adviser Jake Sullivan said that the country continues to see signs of Russian escalation, including new forces arriving at the Ukrainian border. Russia has previously denied that it currently has plans to invade Ukraine, and the U.S. said it does not believe Russian President Vladimir Putin has made a final decision.
The gain in Treasuries pulled the 10-year rate down as much as 10 basis points to 1.93%, temporarily erasing the prior day’s advance. Yields plunged across the curve.
“After being buffeted all week by fears of inflation and a hawkish Fed, it looks like USTs are now rallying on some safe-haven demand due to Russia tensions,” said Brown Brother Harriman & Co.’s Win Thin. “This sort of haven bid is rarely sustained, and so I think we eventually go back to selling USTs next week.”
The yen, which is generally seen as a haven in times of risk aversion, climbed, while the dollar advanced against most other peers and the Russian ruble slid.
With asset prices being pulled to-and-fro by inflation and geopolitical concerns “tensions in financial markets are running high,” wrote BMO’s Ian Lyngen.
(Updates throughout, adds comments.)
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