New Delhi, Oct. 9 -- The smell of fear is permeating the bond market and wafting into other markets. This year's aggressive run-up in interest rates has pushed bond prices lower while volatility has increased. After serving as the "boring" side of investment portfolios for decades, bonds have become an unruly asset class.

A convergence of powerful forces-re-emerging inflation, strong economic growth, and ballooning sovereign debt-led to this era. The shift has created palpable anxiety that higher rates, which increase the cost of capital for corporations and can make fixed income relatively more attractive than stocks, could derail the long-running bull market in equities.

The benchmark 10-year Treasury yield, which influences mortgages...