Matthew.Hornbach@morganstanley.comGuneet.Dhingra@morganstanley.comTony.Small@morganstanley.comSam.Elprince@morganstanley.comDavid.G.Harris@morganstanley.comShreya.Chander@morganstanley.comRobert.J.Brown@morganstanley.comKoichi.Sugisaki@morganstanleymufg.comShoki.Omori@morganstanleymufg.comMORGANSTANLEY&CO.LLCMatthewHornbachSTRATEGIST+1212761-1837GuneetDhingra,CFASTRATEGIST+1212761-1445TonySmallSTRATEGIST+1212296-5876SamElprinceSTRATEGIST+1212761-9491DavidHarrisSTRATEGIST+1212761-0087MORGANSTANLEY&CO.INTERNATIONALPLC+ShreyaChanderSTRATEGIST+44207425-4740RobertJBrownSTRATEGIST+44207425-4638MORGANSTANLEYMUFGSECURITIESCO.,LTD.+KoichiSugisakiSTRATEGIST+8136836-8428ShokiOmoriSTRATEGIST+8136836-5466Pleaseclickhereifyouwouldliketoreceiveourdailyinterestratemarketcommentary:theTreasuryMarketCommentary.GlobalInterestRateStrategistGlobalInterestRateStrategist||GlobalGlobalStayLong,StayPatientThebullsarebackincontrol,butareunlikelytostampedeuntiltheMarchFOMCmeetingin1½weeks.WecontinuetolikedurationlongsintheUSvianotionalneutral2s5sflatteners,andnowwelikeJGBsagain.Westickwith2s10seuroswapflattenersand20s40sJGBflatteners.GovernmentBondsIntheUS,weofferfourfactsthatgiveadifferentperspectiveonsupplyanddemandintheTreasurymarket.WediscussUShouseholdnetworthanditshistoricalimpactonpersonalconsumptionandUST2yyields.Intheeuroarea,weexploreascenariowhereinflationreboundsinthebackhalfoftheyearandtherisksleadingto“pervasiveuncertainty”subside.InJapan,wediscussrecentactivitybyinvestorsinnon-yenassets.InflationIntheUS,westayneutralonbreakevenswhilecontinuingtosuggestbeinglong5-yearrealyields.Wetakeacloserlookatextractingrelativevalueinfront-endTIPS,bycomparingthemtoCPIfixings,ametricwhichistradeableandobservablehistorically.WesuggestlongJuly19sbreakevensvs.sellingtheMayCPIfixing.MoneyMarketsIntheUS,wediscussthepotentialofaFedrepolendingfacilityandwhytheabilityofsuchafacilitytocaptheriseinreporatesatquarter-endswillbesubstantiallyimpairediftheFeddoesnotswitchtoclearingitsrepolendingtodea...
