Treasuries jump amid renewed Russia tension

 by Alice Gledhill

Government bonds surged along with other haven assets amid rapidly escalating tensions in Russia’s war against Ukraine.

The yield on US Treasuries fell at least six to seven basis points across the curve after Russian President Vladimir Putin signed an updated nuclear arms doctrine that allows the country to expand its use of atomic weapons.

The moves extended after a report showed Ukraine had carried out its first strike within Russian territory with Western supplied missiles — just days after the US gave it permission for limited use of the weapons.

The yen, a traditional haven currency, climbed 0.8% against the dollar, while the Swiss franc rose to strongest level against the euro since August. The German 10-year yield slumped as much as 10 basis points to 2.27%, the lowest since late October. 

“It’s purely geopolitical,” said Neil Jones, a managing director at TJM Europe. “The market is taking a lead from the Putin-related headlines, and that’s kicked of a barrage of sell signals from model funds.”

The sudden repricing show how vulnerable markets remain to any escalation in the conflict. And it cuts short a long losing streak for Treasuries, which have broadly been selling off since mid-September on expectation that Donald Trump’s policies will boost growth and rekindle inflation.

Just days ago, the US 10-year yield touched 4.50% for the first time since May. It was trading at about 4.35% on Tuesday morning.

“A lot of negative headlines are going to be made,” said Jordan Rochester, head of macro strategy at Mizuho. “I doubt nuclear gets used but it’s now a higher risk than it was at any point in the war.”

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