Investors piled into U.S. sovereign debt on Thursday, pushing Treasury yields sharply lower after Russia launched an invasion of Ukraine.

Russian forces fired missiles at several cities in Ukraine and landed troops on its coast, officials and media said, after President Vladimir Putin authorized what he called a special military operation in the east.

World Stock Markets Slide

The news triggered a slide in world stock markets, pushing investors into safe havens such as U.S. Treasuries and gold. U.S. stock futures were more than 2% lower , pointing to heavy losses at the Wall Street open.

And as London trade gathered pace, so did a fall in government bond yields.

The yield on the benchmark 10-year Treasury was last down almost 15 basis points (bps) on the day at around 1.85% . It was on track for its biggest daily drop since late November.

"There's clearly no risk appetite this morning and lots of uncertainty," said Chris Scicluna, head of economic research at Daiwa Capital Markets in London.

Across the U.S. Treasury curve, yields were sharply lower on the day, with two-year yields down around 13 bps at about 1.47% .

This echoed moves in European sovereign debt markets, where German Bund yields were set for their biggest daily drop since March 2020 - when the outbreak of COVID-19 threw world markets into turmoil.

Money market futures, meanwhile, suggested investors continue to take off their most aggressive bets for interest rate hikes from the Federal Reserve.

Markets still price in a 25 bp hike at the Fed's March meeting but bets on a 50 bps move have ebbed in the face of the escalating geopolitical tensions.

Justin Onuekwusi, a portfolio manager at LGIM, said expectations for the number of rate hikes this year were being lowered, despite the impact on inflation from rising energy prices, because of a perception that it could be the wrong time to start taking liquidity out of markets.

"Central banks may have to look through an inflation spike, though that means ultimately rate hikes could become substantially bigger," he said.

Commerzbank rates strategist Rainer Guntermann noted a scaling back in rate hike expectations was also reflected in the move lower across the Treasury curve.

2-Year, 10-Year Curve Parallel

"You've seen the Treasury curve moving lower basically parallel from two year to 10-year overnight, not just the usual liquid part like 10s or so but also 2-years, which is probably a reflection of less rate hikes," he added.

Oil prices surged, with Brent breaching $100 a barrel for the first time since 2014, as Russia's attack on Ukraine exacerbated concerns about disruptions to global energy supplies.

As investors rushed to protect against inflation risks, yields on inflation linked bonds fell. The yields on the 10-year Treasury Inflation-Protected Securities (TIPS) fell to as low as -0.71% - its lowest in just over three weeks.