U.S. Treasury prices jumped Friday after a spat between President Donald Trump and Ukrainian President Volodymyr Zelenskyy raised concern over growing geopolitical tensions.
The benchmark 10-year yield Treasury yield fell 6 basis points to 4.222%. The 2-year Treasury yield was down more than 8 basis points at 3.995%. One basis point is equal to 0.01%. Yields and prices move in opposite directions.
Zelenskyy was in Washington to discuss a possible deal that would give the U.S. access to rare earth minerals in an effort to bring the Ukraine-Russia war to an end. However, during a tense meeting in the Oval Office, Trump told Zelenskyy: “You either make a deal or we’re out.”
“You’re gambling with World War III,” Trump also said.
Zelenskyy then left the White House before a scheduled news conference. “He can come back when he is ready for peace,” Trump said in a statement after the argument.
“I don’t think there’s ever been an exchange in public between two leaders like that, as far as I’m aware. Basically just like a street fight on national television,” said Jay Hatfield, chief executive officer at Infrastructure Capital Management. “That’s generally slightly destabilizing for the market, but now that it’s over, it’s kind of like calming down. But, in the long run, it’s good.
Investors quickly fled riskier assets such as stocks as news of the argument broke. The S&P 500 traded about 0.1% lower as of 2:09 p.m. ET. Earlier in the day, the broad market index was solidly higher.
Treasury yields had been under pressure earlier after the release of in-line U.S. inflation data.
The personal consumption expenditures index rose 0.3% month over month in January and 2.5% year over year, the Commerce Department reported. The core PCE index, which excludes volatile food and energy prices, also rose 0.3% last month compared to December, and climbed 2.6% year over year. Those readings were in-line with economist expectations, according to Dow Jones.
The PCE report is an important measure of inflation and helps the Federal Reserve to make decisions on interest rate policy. The central bank’s next meeting is on March 18-19.
“Core PCE, which the Fed focuses most closely on, had its lowest annualized growth reading since June,” eToro US investment analyst Bret Kenwell said in a statement. “These are the developments investors want to see when it comes to lower rates. However, they’ll want to carefully balance a decline in inflation with other key economic trends. Mild inflation is a good thing amid a solid economy, but sacrificing the economy for sub-2% inflation would be a negative for investors.”
