The recent significant increase in long-term Treasury yields has unsettled investors following President Trump's tariff-related actions on "Liberation Day." This upheaval in the financial markets could have widespread effects.

On Wednesday, the 10-year yield (^TNX) surged by 14 basis points, reaching approximately 4.40%. This rise is a stark 53 basis point shift from Monday's low of 3.87% — the largest three-day increase since December 2001. Additionally, the 30-year yield (^TYX) experienced a more subdued gain of 8 basis points after its most significant rise since March 2020 earlier in the week, now trading at 4.79%.

Yields and bond prices have an inverse relationship, which means that higher yields indicate lower bond prices.

According to Ed Yardeni of Yardeni Research, the recent developments suggest that the Trump administration's trade policies could be causing significant stress in the capital markets, potentially leading to a bear market for the S&P 500.

President Trump acknowledged the rise in yields, describing the bond market as volatile. He remarked that the recent fluctuations were significant, emphasizing the impact of his actions on "Liberation Day."

The surge has brought the 10-year yield back to its level at the end of February. This shift has puzzled investors as typically, amid uncertainties like trade tensions, they would seek safety in bonds. However, the recent trend has not aligned with this expected behavior, raising questions about the reasons behind these movements.