"This is beyond fundamentals right now. This is about liquidity," said Jack Chambers, senior rates strategist at ANZ in Sydney.

The 10-year U.S. Treasury yield , the globe's benchmark safe-haven anchor, was unmoored and long bonds were the focus of intense selling from hedge funds which had borrowed to bet on usually small gaps between cash and futures prices.

It shot higher, crossing 4.5% at one point, even as traders ramped up expectations for U.S. rate cuts and, in another signal of dislocation in markets, the dollar fell against the euro and yen.

Japan's central bank, finance ministry and banking regulator called an unscheduled meeting for 0700 GMT to discuss the moves, which pulled back some of the extreme selling.

At 4.41% the 10-year yield was up 16 basis points in Asia and more than 50 basis points from Monday's low.

A three-day rise of nearly 60 basis points in 30-year yields , which spiked above 5%, would mark - if sustained - the heaviest selloff since 1981.

The selloff extended beyond Treasuries to Japan, where the Japanese 30-year government bond yield surged to 21-year highs.

"This is up there with GFC and COVID level of volatility," said Mark Elworthy, Bank of America's head of fixed income, currency and commodity trading in Australia. "Would expect to have some central bank response in the near term if markets continue to behave like they have been in the last 12-24 hours."

Warning signals have been flashing for a few days as spreads between Treasury yields and swap rates in the interbank market collapsed under the weight of bond selling.

BASIS TRADE

Hedge funds were at the heart of it because their lenders could no longer stomach large positions betting on small differences between cash Treasuries and futures prices, or swaps, as markets started to swing on tariff headlines.

"When the prime broker starts tightening the screws in terms of asking for more margins or saying that I can't lend you more money, then these guys obviously will have to sell," said Mukesh Dave, chief investment officer at Aravali Asset Management, a global arbitrage fund based in Singapore.

The so-called "basis trades" are typically the domain of macro hedge funds. They rely on selling futures contracts or paying swaps and buying cash Treasuries with borrowed money, with a view to exploiting slight price differences.

As they dumped Treasuries this week, bond yields have soared and fallen out of sync with swaps . At the 10-year tenor, the gap has shot to 64 basis points, the largest on record.

On Wednesday, the highest U.S. tariffs in more than a hundred years came into force, roiling global markets, and strategists said a broader debate about the future of Treasuries as the centre of the global financial universe was underway.

"The UST selloff may be signalling a regime shift whereby U.S. Treasuries are no longer the global fixed-income safe haven," said Ben Wiltshire, G10 rates trading desk strategist at Citi.

Others have pointed to potential changes in global trade flows over the long run slowing foreign buying of U.S. debt or that foreign holders could turn sellers.

"Markets are now concerned that China and other countries could 'dump' U.S. Treasuries as a retaliation tool," said Grace Tam, chief investment adviser at BNP Paribas Wealth Management in Hong Kong.

In any case, speed of the selloff pointed to pain.

"Yields on super-long bonds have moved up to beyond the level they were at before Trump announced the tariffs, this is like panic selling," said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management in Tokyo.