Southeast Asian stock markets plunged on Monday as rising U.S. bond yields on worries over the prospect of higher interest rates rattled equity investors, with Vietnam shedding five percent to record its steepest fall in nearly two-and-a-half years.

Asian shares fell their most in over a year after fears of resurgent inflation toppled Wall Street on Friday from all-time highs.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped as much as 2 percent, extending losses into a third straight session.

 “There is a cautious mood currently because of the sudden surge in yields, so I think markets are trying to adapt to this changing environment of changing yields and expectations of higher inflation going forward,” said Joel Ng, a research analyst at KGI Securities in Singapore.

Global bond yields have been rising on expectations of improving global growth, which has investors worried about the impact of rising borrowing costs on consumers and companies.

Shares in Singapore closed 1.3 percent lower as financial stocks dragged the index lower.

Top lenders Oversea-Chinese Banking Corp and DBS Group Holdings suffered their worst session in over a month, while United Overseas Bank fell to a four-week low.

Although higher interest rates tend to bode well for lenders, a sudden or much faster rise in yields will cause some problems in the equity markets, Ng added.

Indonesian shares recouped part of their early losses after data showed the economy grew at its fastest pace in four years in October-December.

Consumer stocks weighed heavy on the index, with Astra International Tbk PT falling as much as 2.9 percent.

Unilever Indonesia Tbk PT closed 1.1 percent lower.

Philippine shares closed 2.2 percent lower as heavyweights SM Prime Holdings and SM Investment witnessed selling pressure.

Vietnamese shares plummeted 5 percent on Monday, marking their worst day since Aug 2015.

Thai and Malaysian shares closed around one percent lower.