PANews October 12 news, Morgan Stanley believes that as global bond yields continue to climb, the bond market is completing part of the tightening process in advance that would otherwise need to be achieved by the Federal Reserve through policy rates, which may reduce pressure for further rate hikes in the future and bring room for relief to the stock market. Morgan Stanley Chief U.S. Equity Strategist Mike Wilson said that the U.S. 10-year Treasury yield has risen about 120 basis points since February, and financial conditions have tightened significantly. He believes that if the current market-based tightening is already enough to slow economic demand, the Federal Reserve may not need to control inflation through further increases in policy rates in the future, and investors currently need to focus on two indicators: the performance of financial stocks and bond market volatility (the MOVE index). He said that recently higher long-term interest rates, a stronger dollar, and rising oil
PANews October 12 news: Morgan Stanley believes that as global bond yields continue to climb, the bond market is completing part of the tightening process in advance that would otherwise need to be achieved by the Federal Reserve through its policy rate, which may reduce pressure for further rate hikes in the future and bring room for relief to the stock market.
Morgan Stanley Chief U.S. Equity Strategist Mike Wilson said that the U.S. 10-year Treasury yield has risen by about 120 basis points since February, and financial conditions have tightened significantly. He believes that if the current market-based tightening is already enough to slow economic demand, the Federal Reserve may not need to further raise its policy rate in the future to control inflation, and investors currently need to focus on two indicators: the performance of financial stocks and bond market volatility (the MOVE index).
He said that recently higher long-term interest rates, a stronger dollar, and rising oil prices have already pushed financial conditions tighter. Compared with the absolute level of the 10-year U.S. Treasury yield, the speed of the yield increase and bond market volatility are more worthy of attention. If the pace of the yield rise slows and bond volatility declines, the market may reassess previous expectations of excessive tightening.
In addition, Wilson believes that the upcoming U.S. September CPI data may become a key catalyst for the market. If inflation continues to moderate, it may reduce market expectations for further increases in long-term interest rates and continued Federal Reserve rate hikes, providing support for the bond market. The current market focus is not whether yields are at a high level, but whether the pace of the yield increase is slowing, whether bond volatility is declining, and whether the financial sector can prove that the economy can still absorb a high interest rate environment. If the CPI data are moderate and bond pressure eases, the Federal Reserve may gain more room for policy observation, and the stock market may also usher in broader upside opportunities.