Russia's military operations in and around Ukraine over the past 3 weeks have created significant volatility for the bond market. The fact that the market already in the throes of a major Fed policy adjustment only adds to the volatility.  One would expect the geopolitical tensions to push stocks and bond yields lower, but things haven't been so simple for bonds for several reasons. 

Today starts out with Treasuries and MBS close to unchanged levels and continuing to react to Ukraine headlines. Most of the trading activity since yesterday morning has taken the shape of a move back in a "

In the bigger picture, trading levels are right in the middle of the prevailing range of the past 2+ weeks (when the first significant geopolitical headlines hit on Feb 11).

And how about the effect on the Fed's rate hike outlook?  Several Fed speakers have commented on heightened geopolitical uncertainty in the past 2 days, but all have stopped short of saying that it could prevent the Fed from proceeding with its game plan.  Betting markets (Fed Funds Futures) suggest geopolitical tensions have put an end to the downward spiral seen since the January 26th Fed meeting.

Zooming out, we see that the bounce in the chart above is a pretty small rebound in the bigger picture.  We also see that the rate hike narrative began in October 2021 and merely accelerated in 2022.

Markets are waiting to see if the Ukraine situation is de-escalated or if Russia intends regime change in Kyiv.  In general, de-escalation continues to imply higher rates, but we continue to watch 2.06 and 1.91% in 10yr yields as indications that a more meaningful shift is actually happening.  Until then, we're playing the uncertainty game inside a volatile, but sideways range.