Morgan Stanley ‘Last Bull Standing’ on Treasuries as Peers Shift

Morgan Stanley has pushed back against Treasury bears, saying investors should buy US sovereign debt as markets may be too optimistic over the prospect of a soft-landing for the economy.

Treasuries are also likely to be supported as inflation can keep slowing even if growth does remain relatively healthy, strategists at the investment bank including Matthew Hornbach in New York wrote in a research note.

“We continue to suggest investors adopt an overweight stance on government bond duration,” the strategists said. “Market extrapolation of strong growth into the long term via higher long-term real rates may not pan out, leaving the rise in long-end yields vulnerable to a correction.”

US 10 Year Yields Have Been in Upward Trend Since May

The investment bank is advising its clients buy Treasury five-year notes and 30-year inflation-linked debt, according to the note.

Morgan Stanley’s bullish view clashes with a number of its Wall Street peers.