10-Year Yield Sees Biggest One-Day Jump Since 2020 as Traders Ditch Safe Havens for Riskier Assets

Source: NYSE

U.S. Treasury yields rose sharply Wednesday as traders dumped traditional safe havens and loaded up on riskier assets like stocks.

The yield on the benchmark 10-year Treasury note moved 18 basis point higher to 1.89% in afternoon trading. That marks the rate's biggest one-day jump since March 2020. The 10-year Treasury yield fell as low as 1.68% on Tuesday, with investors rushing into safe-haven investments, as Russia continued its invasion of Ukraine.

The yield on the 30-year Treasury bond advanced 15 basis points to 2.26%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

Wednesday's moves in bonds came as stocks rallied perhaps in anticipation of the Ukraine-Russia situation taking a turn for the better soon.

The conflict in Eastern Europe has continued to drive oil prices higher, with Brent crude futures climbing 6% to $111.59 a barrel on Wednesday. West Texas Intermediate crude futures, the U.S. oil benchmark, were also up more than 6% at $110.18 a barrel.

The jump in oil prices because of the conflict has led to concerns that this could push up headline inflation, slow the economy, thereby complicating the Federal Reserve's plans for normalizing monetary policy.

 "The move today (in yields) was really a walk back of some of the most dire geopolitical worries, along with Powell saying Ukraine has not derailed the Fed hiking. He also said if inflation does not moderate, 50 basis points is on the table," said Ben Jeffery BMO rate strategist.

Fed Chairman Jerome Powell testified before Congress on Wednesday, saying that rate hikes are likely to begin this month despite the "highly uncertain" impact of the war in Ukraine. He said that he is "inclined" toward a 25-basis point cut and that the Fed would would work on, but not finalize, a plan to reduce its balance sheet.

"We will use our tools to add to financial stability, not add to uncertainty," Powell said.

Strong economic data

Private companies in the U.S. added 475,000 jobs in February, ADP said Wednesday. Economists polled by Dow Jones were expecting 400,000. The firm also revised its January numbers upward.

"The lack of any definitive news on a further deterioration in the Russia/Ukraine situation is likely shifting focus back onto the US economy Wednesday morning. Following Tuesday's strong ISM beat, the ADP release this morning points to a still-strong underlying job market in the US ahead of Friday's more definitive Payrolls report," Chris Hussey from Goldman Sachs said in a note to clients. staff contributed to this market report.

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