Asian shares staged a cautious bounce on Wednesday with hopes a global banking crisis would be averted vying with uncertainty over the outlook for U.S. interest rates as the Federal Reserve holds a high-stakes meeting on policy.
The still brittle mood was evident in the latest BofA survey of global fund managers which found pessimism near its worst in the past 20 years amid fears of financial risk and a flight from bank stocks.
They note the Fed could still soften its forward guidance by dropping its reference to "ongoing increases", much as the European Central Bank did last week.An added complication is whether the Fed temporarily stops selling its holdings of Treasury debt, known as Quantitative Tightening, and what Fed members do with their dot plot forecasts for future rate hikes.Having even priced in the risk of a rate cut last week, futures now imply an 86% chance of a quarter-point rise to 4.75-5.0%.
Bond investors will be hoping he can instil some calm given the wild volatility of recent days. Two-year Treasury yields were hesitating at 4.14%, having made a remarkable round-trip from 5.085% to 3.635% in just nine sessions.
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