US Treasury Yields Influence Russian Commodity Trading Amid Global Financial Developments

Ever since Russia decided to go to war with Ukraine, things haven’t been so rosy for the nation on many fronts. The economy has suffered immensely due to sanctions imposed by the US and its allies, which have made it difficult for the nation to export its commodities. Consequently, the prices of these commodities have skyrocketed, impacting global financial markets.

The first obvious effect has been higher inflation. Around the globe, commodities are used to produce a wide range of goods and services; therefore, when their price goes up, the cost of production goes up too. These higher costs of producing goods and services are passed down to consumers in the form of higher prices.

Consumers’ pain is commodity traders’ gain, as they can capitalize on the higher prices to make more profits on their investments. To get into commodities markets, an investor can get started by googling “what is commodity trading” to learn all they need to know to make the most of these markets.

The rising cost of commodities has also raised concerns about a global recession. It’s no secret that higher inflation can lead to slower economic growth as consumers and businesses become more cautious about spending. Something that has been observed in Europe, which heavily relies on Russian energy imports.

Investors See US Treasury Bonds Are Seen As Safe Investments

Interestingly, the phenomenon has also put pressure on US Treasury yields. Over the years, investors have seen US Treasury bonds as safe-haven investments. Therefore, whenever there are concerns about the global economy, this is where they turn. As a result, the price of Treasury bonds rises while lowering their yields. US Treasury yields play an important role in the global economy as they are good indicators of its health. Normally, when Treasury yields are low, investors are confident in the global economy. On the other hand, when they are high, it shows investors have some worries.

Looking at the current environment, Treasury yields are on the rise, which signifies growing concerns among investors. It’s a situation that is likely to go on as long as the war in Ukraine doesn’t stop and sanctions against Russia remain in place.

That said, Russian commodity exports have been affected heavily by sanctions. The US and its allies have banned imports of Russian oil and gas and restricted trading in other commodities such as coal and metals. Consequently, this has led to a sharp decline in Russian export earnings.

Prior to the Ukraine war, Russia was the world’s largest exporter of natural gas and the second-largest exporter of oil. Sanctions have made it tough for the nation to export these commodities, resulting in an explosion in their prices. For instance, as of last month, the average price of Brent crude oil was $105 per barrel, which is $40 more than it was at the start of the year.

The prices of coal have also risen despite sanctions having less impact on coal exports. Russia remains a major exporter of coal, and as of last month, the average price of thermal coal was $280 per tonne, up from $150 per tonne at the start of the year.

Sanctions have also had a mixed impact on metal exports. Russia is a major producer of metals such as nickel, copper, and aluminum. That said, the prices of metals such as aluminum have skyrocketed while those of copper have fallen.

What Next For The Russian Commodity Market?

As things stand, sanctions on Russian commodity trading are likely to continue over the coming months, which will lead to higher prices for commodities. However, if Russia is to fall back and stop waging war against its neighbor, then sanctions could be eased, leading to lower prices, which will be good for US Treasury yields. However, right now, there is a lot of uncertainty. Global markets are likely to feel the impact of the continued sanctions as the war drags on.