Australian Shares Plummet 2% as Bond Yields Climb

Australian shares plummeted nearly 2% on Thursday, dropping to their lowest level in four months. The decline wiped out Wednesday's rally and pushed the market to its lowest since mid-June.

The benchmark S&P/ASX 200 index was down 171.1 points at 8,618.2 as of 1:46 p.m. AEST, with about 50 billion Australian dollars removed from the market's value by early afternoon.

Rising borrowing costs were a major contributor to the slide, with Australia's policy-sensitive three-year government bond yield climbing 3 basis points to 4.98%. U.S. long-term Treasury yields also continued their steep climb, reaching near multi-decade highs.

The Reserve Bank of Australia warned in its October Financial Stability Review that global and operational threats now pose the most prominent risks to the financial system. The central bank highlighted rising government debt and leveraged hedge fund activity in bond markets as key concerns.