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Here's who is causing the bond market to freak out

The stunning move in Treasury yields to record lows early Friday morning signals panic and fear, but it's not necessarily coming from the United States.

U.S. bond yields are tethered to global rates, and with about $12 trillion in negative-yielding debt around the world, U.S. Treasurys and corporate debt look very attractive.

As the yields on U.K. gilts sunk to new lows overnight and German bunds dug deeper into negative territory, buying in U.S. Treasurys sent the 30-year bond yield to an all-time low of 2.18 percent early Friday and the 10-year dipped below its closing high of 1.38 percent temporarily.

"This is buying coming from Europe. It started around 2 in the morning," said Andrew Brenner, head of international fixed income at National Alliance. "This is all about flight to quality, flight to quality in duration." The duration of choice for traders has been the longer end — the 10- and 30-year sector of the U.S. bond market.

"It was absolutely panic buying. Panic buying shows up more as a panic when you're at one of the more illiquid days of the year, when you're at a skeleton staff which is what you are today," said Brenner. "I don't use those words lightly. This thing at 2 a.m. shot up right off the bat."

The buying calmed down as the U.S. market opened. The U.S. 30-year was at 2.21 percent Friday. It's previous closing low was 2.223 percent, reached in January 2015. The 10-year yield was at 1.44 percent in morning trading, back above the low it set in July 2012.

"This morning was the lowest yield we've ever seen in the 30-year," said Brenner. Bank of America Merrill Lynch, however, said the yield was the lowest since the 1950s, according to Reuters.

Some of the latest round of buying was triggered by comments from Bank of England Governor Mark Carney on Thursday who said the U.K. central bank is likely to ease again this summer. The U.K. two-year temporarily turned negative, and the 10-year gilt yield briefly touched a low of 0.77 percent, after falling below 1 percent for the first time after the Brexit vote.

European bonds ignored good news for the euro zone economy, which showed improvement in manufacturing activity Friday. Euro zone manufacturing PMI reached a six-month high of 52.8, and British manufacturing PMI, at 52.1, expanded at the best pace in five months.

"This is a half day in New York and a lot of people said goodbye to us yesterday afternoon. There's not a lot of people around, and these moves tend to get oversized," said Brenner. He said the "panic buying" appears to be from European accounts but also Asian.

The U.S. 10-year is a key benchmark for U.S. financial markets, and it affects mortgage rates and a host of other loans. Traders had expected it to break its low yield but some had speculated that might occur around next Friday's U.S. jobs report.

Even before the U.K. voted to split from Europe last week, global bond yields have been testing uncharted territory. Easing programs by the European Central Bank and the Bank of Japan have resulted in negative rates in both Europe and Japan, and bond-buying programs have made some longer duration bonds scarce.

"We're in an environment where yield doesn't matter. It's all about price. That's how you can rationalize the negative yield curves in Europe too. Not that I think the long-end (U.S.) yields will get anywhere near those levels," said Tom Simons, money market economist at Jefferies.

Bond yields move opposite to price, so it often is viewed as a 'flight to safety' trade when bond yields move lower, signaling some sign of unease in the world or in the economy.

"This is really a lot more based on risk management more than anything else, understanding that we're in an environment where political headlines tend to dominate trading more than economic data," said

But how low U.S. yields can go is a question hanging over the market, and no one really has a good answer.

The 10-year was at 1.44 percent Friday morning, after a report of surprisingly strong U.S. manufacturing data. ISM manufacturing rose to 53.2, well above expectations.

Technical strategists have no history to look back at to say the 10-year once held support here, or resistance there, once it dips beneath 1.38 percent. Analysts say it's quite possible the 10-year could even break 1 percent, though they are not necessarily expecting it to.

Technicians are eyeing a level on the charts where a channel formed after the Fed stopped hiking rates in 2006. That channel points to 1.15 percent.

"Given how it's been very technical, I do think breaking 1 percent requires a recession, or people really start to fear that's what we're heading for," said Nomura rate strategist George Goncalves. "People are talking about that. 1.25/1.30 is a good level to stabilize, and 1.15 is what technicians are looking at. These are just numbers, but nothing stops it from going lower."

The next economic event that could stir up big reactions in Treasurys is the nonfarm payrolls data for June, expected next Friday. May's report bombed, with just a shocking 38,000 jobs created.

Economists are expecting 180,000 payrolls for June, but if there's an early warning from ADP's report Thursday that the estimate could be too high or the number misses the mark again, yields could sink lower. Some traders say buying ahead of the report could push yields lower anyway.

Correction: ADP's employment report is Thursday. An earlier version misstated the day.