Morgan Stanley: "Maintain a neutral stance on U.S. Treasuries"…Watching Middle East risks and fiscal-policy uncertainty
Summary
- Morgan Stanley said investors should maintain a neutral stance on U.S. Treasuries due to Middle East geopolitical risks and uncertainty over fiscal policy and monetary policy.
- Morgan Stanley strategists said expectations for additional fiscal stimulus are behind U.S. Treasuries failing to respond sufficiently to the safe-haven preference flow.
- Strategists said that in a Fed environment that is not dovish, it is disadvantageous to use U.S. Treasuries as a hedge against risk assets.
Forecast Trend Report by Period
Morgan Stanley has said investors should maintain a neutral stance on U.S. Treasuries for the time being, citing still-elevated uncertainty over Middle East geopolitical risks and the trajectory of monetary and fiscal policy.
According to U.S. cryptocurrency-focused outlet Odaily on the 23rd, Morgan Stanley strategists wrote in a report that they "prefer to remain neutral on U.S. Treasuries until we can more clearly assess the impact of the Iran conflict on Federal Reserve (Fed) policy and fiscal policy."
They pointed to fiscal-policy expectations as a key reason Treasuries have recently failed to fully play their traditional safe-haven role. The strategists explained that "expectations for additional fiscal stimulus could be why Treasuries did not respond to the risk-off bid as would typically be expected."
They also said constraints remain on the monetary-policy front. They assessed that "in a Fed environment that is not dovish, it is disadvantageous to use Treasuries as a hedge against risk assets."
Minseung Kang
minriver@bloomingbit.ioBlockchain journalist | Writer of Trade Now & Altcoin Now, must-read content for investors.
