The S&P/ASX200 slumped 161.8 points, or 1.82 per cent, to 8,738.8, as the broader All Ordinaries fell 157.9 points, or 1.72 per cent, to 9,010.1, wiping more than $53 billion from the top-500's combined $3.1 trillion market cap.
The local bourse's drop echoed similar moves in global equities, following a spike in yields as bonds sold off amid fears over nations' fiscal deficits, sticky inflation and US President Trump's flagged interventions with the US Federal Reserve.
"It's not so much that yields go higher, it's the pace of the rising yields" IG Markets analyst Tony Sycamore told AAP.
"And while not quite at those levels where you would start to get alarmed, it does pay to be very watchful about what happens to them next."
All 11 local sectors closed in the red, with interest rate-sensitive financials (-2.8per cent), IT stocks (-3.9 per cent) and real estate stocks (-2.4 per cent) leading the losses.
The ASX200's top-five worst performers on Wednesday were in tech or real estate.
Each of the big four banks sold off, led by more than 3.5 per cent dips in CBA and Westpac.
Raw materials stocks were also heavy, as BHP slipped 1.3 per cent to $42.29 a share.
Local gold miners were initially buoyed by the sell-off in bonds and equities as futures in the precious metal breached $US3,600 ($A5,525) an ounce, but by the end of the day they were mostly flat.
Pantoro Gold was an exception, the top-200's best performer with a 3.1 per cent lift to $5.25.
Xero was at the other end of the table, sliding 6.2 per cent to below $150 a share. The accounting software company has lost more than 23 per cent of its value since completing its institutional share placement in late July.
Energy stocks fell 1.2 per cent, fading along with the oil price as data showed US manufacturing contracted for a sixth-straight month.
Woolworths continued its post-results sell-off, shedding more than 17 per cent following its earnings announcement a week ago.
Health care stocks have continued to be under pressure, losing one per cent on Wednesday and the sector down almost 15 per cent since CSL's earning's miss.
The Australian dollar is buying 65.11 US cents, down from 65.39 US cents on Tuesday at 5pm.
The Aussie enjoyed a brief uptick after Australia's March quarter GDP growth beat expectations, but the move faded to a memory within a few hours.
ON THE ASX:
* The S&P/ASX200 dropped 161.8 points on Wednesday, or 1.82 per cent, to 8,738.8
* The broader All Ordinaries fell 157.9 points, or 1.72 per cent, to 9,010.1
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 65.11 US cents, from 65.39 US cents on Tuesday
* 96.77 Japanese yen, from 96.77 Japanese yen
* 55.98 euro cents, from 55.89 euro cents
* 48.67 British pence, from 48.35 British pence
* 111.24 NZ cents, from 111.11 NZ cents
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