Morgan Stanley: Further Rebound in US Bonds Requires a Significant Increase in Rate Cut Expectations

On February 26, strategists at Morgan Stanley Research said that unless the market significantly raises expectations for the Federal Reserve to cut interest rates, U.S. Treasuries are unlikely to rebound further. “A further rebound in the Treasury market may require a dovish shift,” they said in the report. They estimate that the 10-year Treasury yield could fall below 4.00% if the market’s market estimate of the Fed Funds Intrerest Rate trough falls to 3.25% from around 3.65% currently.