Commonwealth Bank of Australia has suggested that softer US inflation data or a move by the Federal Reserve to raise interest rates could be the only circuit breakers to stem the current global bond selloff. "This is just a massive bout of hawkish sentiment taking over," said Michael Tang, a Sydney-based rates strategist at the bank. "Oil prices have just spiked, the US repo auction disappointed, and Trump is talking about handing out a $5,000 dividend—though highly unlikely to be implemented—at a time when investors are extremely sensitive to fiscal control."

In his view, "Softer US CPI data and a Fed rate hike really are the only circuit breakers at the moment; otherwise, I don't think anyone will be willing to go long rates." He added that "there is little chance of any substantive fiscal policy measures in the US in the near term, so monetary policy remains the last bastion of credibility."

Australian cash bonds were initially just tracking the overnight futures decline in early trading, but there is a risk the selloff could broaden further. "In the early stages of the Middle East conflict, Friday also proved to be a bad day for Australia and New Zealand, as investors tend to pull out of high-beta markets to avoid risk." Furthermore, "the market selloff has likely triggered a large number of stop-loss orders by now, so from a positioning standpoint, this is further exacerbating the weakness."