In the wake of President Trump’s tariff-related “Liberation Day,” unusual fluctuations in long-term U.S. Treasury yields have left investors on edge, fearing that something is about to go wrong in the markets.
As of Wednesday’s close, the 10-year Treasury yield surged by 14 basis points, reaching around 4.40%. This represents a dramatic 53 basis point swing from Monday’s low of 3.87%, marking the biggest three-day jump since December 2001. This spike came just after Trump announced a 90-day pause on reciprocal tariffs for several countries, along with increased tariffs on China.
Meanwhile, the 30-year yield saw more modest gains, climbing 8 basis points after experiencing its largest upward move since March 2020 earlier this week. After the close of trading, the 30-year yield stood at 4.79%.
Bond yields and prices are inversely related, so the recent surge in yields signals a fall in bond prices. This shift has raised concerns about broader market instability. Ed Yardeni, president of Yardeni Research, warned that the Trump administration’s trade policies could push the markets to a breaking point. “Something may be about to blow up in the capital markets due to the stress caused by the administration’s trade war,” he said in a research note. “If so, then the S&P 500 will likely fall into a bear market.”
President Trump himself acknowledged the bond market’s recent turmoil. Speaking on the White House Lawn, he commented, “The bond market is very tricky. I was watching it. But if you look at it now, it’s beautiful.” He added that the significant move in yields was not due to his latest tariff actions, but rather his earlier decisions on “Liberation Day.”
Confusion Over Bond Market Movements
The surge in Treasury yields is perplexing given the context of rising tariff tensions and concerns about a potential recession. Typically, when trade conflicts and recession fears intensify, investors tend to seek safe-haven assets like bonds, which pushes bond prices up and yields down.
However, this time, the opposite is happening. Investors have not flocked to bonds as expected, raising questions about what’s driving the bond market’s behavior. Experts warn that the unusual dynamics could indicate deeper issues in the market, possibly leading to a more severe financial crisis.
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