Asian bonds dropped steeply again yesterday, as risk aversion spiked due to more fears about the US sub-prime crisis. This follows weak US labour data on Friday and more mortgage-related rating actions that spurred a sharp rally in US Treasuries. According to a BNP Paribas report released Monday, the yield curve steepened 8bp on the day to 27bp as the futures market priced in higher odds of a Fed rate cut.
Today, the US Federal Reserve will announce its assessment on the health of the countryÆs economy, and review interest rates.
This heightened risk-aversion comes despite MoodyÆs announcement on Friday that the fallout among Asia's investment and universal banks due to the US sub-prime mortgage...
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