Treasuries gain as Middle East tensions rise

Treasuries gain as Middle East tensions rise

Treasuries gained some ground on Tuesday as investors sought safety amid rising tensions in the Middle East and uncertainty over the U.S. government funding and inflation outlook.

The two- and 10-year yields edged lower on Tuesday, as the U.S. new home sales data for January came in weaker than expected, partly due to the severe winter weather. The market was also watching the latest developments in Washington, where President Joe Biden was set to meet with congressional leaders over the looming deadline to avoid a government shutdown. Traders work on the floor of the NYSE in New York

The Federal Reserve, meanwhile, remained cautious about cutting interest rates early, despite the market expectations of a rate hike by April. The Fed officials reiterated their focus on the inflation risks and the need for patience in adjusting the policy. The market will get more clues on the inflation situation on Thursday, when the personal consumption expenditures (PCE) index, the Fed’s preferred inflation gauge, will be released.

The inflation picture was also complicated by the mixed signals from the energy market, where the oil prices were slightly higher on Tuesday, but well below the three-month highs reached last week. The oil market was influenced by the geopolitical developments in the Middle East, where the attacks on the shipping in the Red Sea and the possible breakthrough in the Gaza ceasefire talks added to the uncertainty.

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Biden said on Monday that Israel had agreed to stop its Gaza attacks for the Muslim holy month of Ramadan, as Hamas considered a truce deal that involved a prisoner-hostage swap. At the same time, the U.S. Central Command reported that Yemen’s Iran-backed Houthis had failed to hit a U.S.-flagged oil tanker in the Gulf of Aden on Feb. 24. Russia also announced a six-month ban on gasoline exports from March 1, adding to the supply concerns.
On Wall Street, the stocks were holding on to their recent gains, as the earnings season was winding down and the consumer confidence data for February was due later in the day. Overseas, Japan’s core consumer inflation slowed for a third consecutive month in January, but did not fall below the Bank of Japan’s 2% target as expected, keeping the hopes alive for an end to the negative interest rates by April.
On Wall Street, the stocks were holding on to their recent gains, as the earnings season was winding down and the consumer confidence data for February was due later in the day. Overseas, Japan’s core consumer inflation slowed for a third consecutive month in January, but did not fall below the Bank of Japan’s 2% target as expected, keeping the hopes alive for an end to the negative interest rates by April.

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Source : yahoo finance

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