US Treasuries extended significant losses on Wednesday, reflecting a broader market panic as investors began dumping even their safest assets.
The selloff comes as a global market rout, triggered by US tariffs, accelerates and triggers a flight to cash.
"This is beyond fundamentals right now. This is about liquidity," said Jack Chambers, senior rates strategist at ANZ in Sydney.
The 10-year US Treasury yield, which is often considered the global benchmark for safe-haven assets, surged by 20 basis points in Asia – a notable move given that this market typically sees stable movements in this time zone.
The yield jumped to 4.46%, up 59 basis points from Monday’s low, as hedge funds took the lead in selling off positions.
Traders indicated that these hedge funds were being forced out of leveraged bets, where they previously profited from small gaps between cash and futures prices.
"This kind of thing becomes problematic if the prime broker starts saying that now ... I want to charge you a higher margin or I basically want more margins from you," said Mukesh Dave, Chief Investment Officer at Aravali Asset Management, a global arbitrage fund based in Singapore.
The selloff was even more pronounced in long-term U.S. bonds, with the 30-year yield spiking by 24 basis points to 4.9553%.
If the current pace continues, it could mark the heaviest selloff in the long end of the bond market since 1981.
Heavy selling was reported in Japan and Australia, further indicating global concerns about the stability of financial markets as liquidity worries grow.
The rapid increase in yields has left many market participants questioning how long this turmoil will last and whether it will spark further distress across other asset classes.
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