Treasury bond exchange traded funds rallied on Friday with yields dropping as anxious investors maintained their risk-off sentiment and monitored developments between Russia and Ukraine.
On Friday, the iShares 7-10 Year Treasury Bond ETF (IEF) rose 0.3%, and the iShares 20+ Year Treasury Bond ETF (NasdaqGS: TLT) increased 1.0%. Meanwhile, yields on benchmark 10-year Treasury notes dipped to 1.925%, while yields on 30-year Treasuries fell to 2.247%. Bond yields and prices have an inverse relationship.
Renewed fears of a Russian conflict with Ukraine has driven demand for safe-haven assets on Friday. U.S. and European officials have cautioned that an estimated 150,000 Russian troops have amassed around Ukraine’s borders, with American leaders warning that Moscow is ready to invade at any moment.
The Ukraine situation “remains fragile and still has the potential to trigger major market moves at any time,” analysts at Commerzbank said in note, according to MarketWatch. “Moving towards the weekend, we suggest to remain cautious whatever headlines today might bring.”
Investors are struggling with mixed messages on the potential conflict between Russia and Ukraine as Secretary of State Antony Blinken highlighted an imminent Russian invasion into Ukraine and proposed a last-ditch diplomatic meeting with Moscow, the Wall Street Journal reports.
“It could create a more risk off environment where investors just want to move out of riskier assets into safer assets,” Michael Sheldon, chief investment officer at investment advisory firm RDM Financial Group, told the WSJ.
For instance, the conflict could extend the elevated inflationary environment by disrupting supplies of important commodities, according to Hani Redha, a portfolio manager at PineBridge Investments. Russia is among the top suppliers of oil, wheat, and industrial metals like palladium, aluminum, and nickel.
“Inflation is really the big question that will determine how markets play out, and that only adds to the delay in resolving the inflation situation,” Redha told the WSJ.
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