Inflation Worries Contribute To Steep Drop By Treasuries

(RTTNews) - Treasuries showed a substantial move to the downside during trading on Tuesday, adding to the modest drop seen in the previous session.

Bond prices fell sharply early in the session and remained firmly negative throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 12.1 basis points to 1.872 percent.

The steep drop by treasuries came as traders worried surging energy prices will lead to higher inflation, encouraging the Federal Reserve to more aggressively raise interest rates.

Crude for April delivery gave back ground after reaching a high of $129.44 a barrel but still spiked $4.30 to $123.70 a barrel.

Oil prices continued to skyrocket as President Joe Biden officially announced a U.S. ban on the import of Russian oil, liquefied natural gas, and coal in response to Russia's unprovoked invasion of Ukraine.

"We're banning all imports of Russian oil and gas and energy," Biden said. "That means Russian oil will no longer be acceptable at U.S. ports, and the American people will deal another powerful blow to Putin's war machine."

Biden acknowledged many European countries would not be able to join the U.S. in the ban but said his administration would work with their partners to reduce their dependence on Russian energy.

Earlier in the day, the European Union had revealed plans to reduce its dependence on Russia energy, with the bloc's executive arm the European Commission pledging to reduce Russian gas imports by two-thirds by the end of this year.

Gas stations are raising prices along with the spike in oil futures, as AAA said the average price for a gallon of gas has reached a record high of $4.173.

The national average gas price is up by nearly $0.11 a gallon from just yesterday and up more than $0.55 a gallon from a week ago.

The higher gas prices are likely to weigh on consumer spending in other areas, potentially leading to an economic slowdown even as the Fed prepares to begin raising interest rates.

Amid a quiet day on the U.S. economic front on Wednesday, traders are likely to remain focused on developments overseas and in the energy markets.

The results of the Treasury Department's auction of $34 billion worth of ten-year notes may also attract some attention.