Bond Brief: Jobless Selloff

"The dramatic moves have really only been in the 30-year ... because we haven't had supply at the long end of the curve for a long time," he says. "We're coming back into supply and we'll see an overall adjustment on the long end of the curve to more realistic levels."

Overseas, the European Central Bank left its key rate at 2.5%, and comments from ECB President Jean-Claude Trichet dampened speculation that the bank will aggressively raise rates this year.

Thursday's rate decision was expected, but the euro fell on Trichet's comments. The euro gained 2.3% in the first quarter on expectations that the ECB would narrow the gap between its target rate and the fed funds rate.

If the ECB raises rates enough to significantly narrow that gap, then the 10-year Treasury note would not be as relatively attractive to global investors looking for a decent return on a safe-haven investment.

A key reason why the U.S. bond market performed so well in recent years is that it has offered the highest return of debt markets worldwide. The comments from Trichet helped Treasuries come off their post-jobless-claims lows.

While he believes there's still plenty of liquidity "sloshing around," Shin says that the market is coming to believe that higher interest rates all over the world are an inevitability.

"There's been so much more chatter about the global drying of liquidity ... all of the central banks are really starting to play the same tune," says Shin. "That is throwing markets off."

Indeed, short-term rates in Japan rose sharply Thursday on news the nation's monetary base posted its first year-over-year decline since January 2001, evidence of tighter monetary conditions.