Morgan Stanley Says Bonds Set to Surge in 2016 Year of the Bull

Morgan Stanley, one of the Wall Street banks that deals directly with the Federal Reserve, cut its bond Yield forecasts for 2016 and said the U.S. central bank will wait until December before raising interest rates.

“The global backdrop for rates markets looks so supportive that 2016 may become known as the ‘Year of the Bull,”’ according to a report the company issued Sunday by analysts including Matthew Hornbach, head of global interest-rate strategy in New York.

The company’s new and previous forecasts for 10-year yields by Dec. 31 are:

* U.S. 1.75 percent versus 2.70 percent.

* Germany 0.55 percent versus 1.20 percent.

* U.K. 1.50 percent versus 2.60 percent.

* Japan negative 0.2 percent versus 0.85 percent.

Morgan Stanley is one of the 22 primary dealers that trade with the Fed and underwrite the U.S. debt.

Benchmark Treasuries were little changed Monday, with the 10-year note yield at 1.97 percent as of 9:37 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in February 2026 was 96 27/32.

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net, Nicholas Reynolds, Simon Harvey

By: Wes Goodman

©2016 Bloomberg News