On Sunday, the U.S. administration took emergency steps to shore up banking confidence, guaranteeing deposits after withdrawals overwhelmed Silicon Valley Bank and closing under-pressure lender Signature Bank in New York.
But while stock futures rose in relief, bond markets opened in Asia with a furious race to re-price rate expectations on the thinking that the Federal Reserve can only be reluctant to hike next week while the mood is febrile and delicate.
U.S. interest rate futures surged and a hard-running rally in short-term bonds extended, putting two-year Treasuries on course for their best three-day gain since Black Monday in 1987.
Bank stress and the resultant shakeout of loan books mean higher borrowing costs, said Akira Takei, fixed income portfolio manager at Asset Management One in Tokyo, with the resulting pressure in the real economy making further hikes difficult.
“If (U.S. Fed Chair Jerome) Powell lifts interest rates next week, he will…
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