March 3, 2014 / 5:41 PM / 3 years ago

TREASURIES- Ukraine conflict sends yields to 4-week low

3 Min Read

* Safety bid lifts U.S. Treasuries prices

* Better-than expected U.S. economic data temporarily pares price gains

* Fed bought $2.63 billion in debt maturing between 2022 and 2023

By Marina Lopes and Karen Brettell

NEW YORK, March 3 (Reuters) - U.S. Treasury debt prices rose on Monday as Russia's military intervention in Ukraine increased demand for safe-haven investments like U.S. government debt, pushing yields to the lowest in almost a month.

Russia took a financial hit over its military intervention in neighboring Ukraine, with its stocks, bonds and currency plunging as President Vladimir Putin's forces tightened their grip on the Russian-speaking Crimea region.

Tension in the region drove Treasury volume up overnight and sent 10-year yields to 2.5920 percent, the lowest since Feb. 4.

"Obviously, Ukraine is first and foremost on participants' minds right now. What is really driving things is the flight-to-quality bid," said David Coard, head of fixed income sales and trading for Williams Capital Group in New York.

Volatility in emerging markets and disappointing economic data has pushed yields lower than what some traders and analysts see as fair value.

"There's a lot priced in already. Even though the data hasn't been as strong as people hoped, it's still not nearly as poor to justify 2.60 percent on 10-year yields," said Aaron Kohli, an interest rate strategist at BNP Paribas in New York.

BNP sees 10-year note yields as fairly valued at between 3 percent and 3.25 percent, though Kohli noted that yields could fall further from current levels if there is an escalation in the Ukrainian conflict or new weakening in the U.S. economy.

"A lot of what we're seeing right now might have been started by an emerging market blowup in Asia, but certainly the Ukrainian situation has added to the concerns and it's been mostly responsible for the move from around 2.75 percent to around 2.60 percent," Kohli said.

Ten-year notes were up 15/32 in price, sending yields down to 2.608 percent, from Friday's close of 2.66 percent. Thirty-year bonds rose 23/32 in price, pushing yields down to 3.556 percent from Friday's close of 3.594 percent.

Prices temporarily pared gains after U.S. manufacturing growth rebounded in February, coming off an eight-month low, helped by a recovery in new orders. U.S. consumer spending also rose more than expected in January, likely as chilly weather boosted demand for heating.

"The economic data looks fairly healthy and stronger than expected, suggesting that concern about the Ukraine and any spillover effect may be offsetting any selling pressure these numbers might have caused," said Coard.

The Federal Reserve bought $2.63 billion in debt maturing between 2022 and 2023 as part of its continued bond buying program.

Traders await nonfarm payrolls data due on Friday for a stronger indication of the country's economic strength.

"People will be looking to see if the labor market has been able to bounce back from the recent disappointing numbers," said Coard.

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