U.S. Treasury yields rose on Wednesday morning, with investors focused on the Russia-Ukraine conflict and Federal Reserve Chairman Jerome Powell’s congressional testimony.
The yield on the benchmark 10-year Treasury note moved 15 basis point higher to 1.86% in afternoon trading. The yield on the 30-year Treasury bond advanced 12 basis points to 2.226%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
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.
Powell said on Wednesday 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.
The conflict 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.
Military experts say they expect the war in Ukraine to become more destructive and deadly as Russia turns to heavy artillery.
In his State of the Union address, U.S. President Joe Biden promised to “inflict pain” on Russian President Vladimir Putin.
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 Fed’s plans for normalizing monetary policy.
Susannah Streeter, senior investment and markets analyst at U.K. investment platform Hargreaves Lansdown, said on Wednesday that it is now expected that the Fed might not be as aggressive in hiking interest rates this year “with the spectre of stagflation looming, and expectations of a bigger hike at the next meeting are fading away.”
On the economic front, private companies in the U.S. added 475,000 jobs in February, according to ADP. Economists polled by Dow Jones were expecting 400,000. The firm also revised its January numbers upward.
An auction is scheduled to be held on Wednesday for $35 billion of 119-day bills.
— CNBC.com staff contributed to this market report.
