📝 Expect 10-Year Yield Reaching 3.15% By Mid-2023: Morgan Stanley

Treasury yields are seen higher heading into next year led by the 2-year yield, the 10-year yield is seen reaching 3.0% by the end of the year and 3.15% by mid-2023. Continued focus on above-target inflation keeps the Fed marching toward neutral in 2022, and ultimately restrictive in 2023 -- driving the bulk of the rise in yields. Both 2s10s and 2s30s should flatten and ultimately invert, to levels lower than market-implied forwards. Technical factors like the US defined benefit private pension fund bid, as well as downside growth pressures across the globe, drive inflows into the back end of the Treasury curve, which along with stagflation fears promote flattening. - Morgan Stanley Rates Strategy