Short-dated U.S. Treasuries prices wobbled as investors grew nervous that the Federal Reserve may raise interest rates sooner than expected, following comments last week from Janet Yellen, the bank's new chief.
Japan's Nikkei dropped 0.4 percent while MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.1 percent.
That followed a lacklustre session on Wall Street, where the Nasdaq Composite Index led the losses with a fall of 1.2 percent to a five-week low as investors took some money off recent top performers such as biotech shares. The S&P500 Index fell 0.5 percent to 1,857.44.
Concerns over Ukraine and soft U.S. manufacturing were cited as possible catalyst, though market players noted the selling could also reflect unwinding of positions ahead of the quarter-end. Markit's U.S. manufacturing survey showed U.S. factories slowed down in March.
The diplomatic standoff over Ukraine continued as U.S. President Barack Obama and major industrialised nations warned Russia on Monday it faces additional economic sanctions if President Vladimir Putin takes further action to destabilise Ukraine.
"In short, there's nowhere to put money at this point. Investors are generally upbeat on the U.S. but they want to see more evidence that the weakness in some of the recent data is due to a bad weather," said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.
In a world full of uncertainty, short-term U.S. bonds attracted even more attention after Federal Reserve Chair Janet Yellen explicitly said last week the Fed could raise rates around six months after its current bond-buying programme ends.
Money market futures are pricing in some chance of a rate hike by spring 2015 with a full rate hike to 0.50 percent fully priced in by August next year.
Even as the U.S. 30-year bond yield fell to 3.56 percent, near this year's low of 3.525 percent, short-dated debt yields moved in the opposite direction as investors tried to price in future rate hikes.
The U.S. two-year yield shot to six-month high of 0.4655 percent on Monday and last stood at 0.437 percent. It was around 0.35 percent before Yellen's comments.
Rising U.S. short-term rates were undermining the attraction of precious metals, with gold was fetching $1,313.46 per ounce, close to Monday's near five-week low of $1,307.54.
Silver tumbled to a six-week low of $19.84 an ounce and last stood at $19.98.
While rising U.S. rates are generally seen as negative for emerging markets, many of them were resilient in part helped by expectations the Chinese government could unveil stimulus measures following weak Chinese manufacturing data on Monday.
"The data was pretty bad. It looks almost certain that the first quarter growth is likely to fall short of the government's growth target of 7.5 percent. So the government is likely to take some measures, as it has done a few times in the past year, to support the economy," said Naoki Tashiro, President of T.S. China Research.
Mainland Chinese shares have also risen near this month's high, while Brazilian shares, seen as susceptible to Chinese markets, also hit a five-week high.
Analysts said any policy measures by China to support the economy would be modest and certainly not on the scale of the global financial crisis, when a torrent of lending led to an unprecedented build-up of debt.