The Company received a letter from the Brown Rudnick law firm which said that the retailer had breached a covenant of a bond indenture agreement by granting a lien on its inventory, according to the complaint.

FORBES: J.C.Penney's Bad Vibes Lead To A Death Watch

The increasing likelihood of a bailout agreement between Hungary and the International Monetary Fund have pushed Hungarian bond yields, which decline as prices rise, to around 7% from about 10% last year when Legg Mason first bought in, Mr. Smith says.

WSJ: Tiny Countries' Markets Are Looking Good

Many individual investors have also expressed angst over the lack of agreement on the debt ceiling, and it is likely that this contributed to the decline in bond allocations.

FORBES: Investors' Interest In Stocks Weakens

As a foundation for this new world order, Mr Priestland is hoping for a new Bretton Woods-style agreement one that would regulate international capital movements and thus tame the power of the bond markets.

ECONOMIST: A history of power

The selloff intensified during the afternoon, when minutes from the central bank's last policy meeting indicated some members were willing to start rolling back bond-buying as early as June, though the decision makers didn't near agreement on the matter.

WSJ: Stocks Give Up Early Gains

Meeting minutes from the bank's last policy meeting indicated some members were willing to start rolling back its bond-buying program as early as June, though the decision makers didn't near agreement on the matter.

WSJ: Stocks Give Up Early Gains