In its 2025 global strategy outlook report, Morgan Stanley Research suggests an optimistic stance on G10 government bond durations. Analysts at Morgan Stanley recommend overweighting duration for most government bonds in the first half of 2025.
They anticipate that the U.S. Federal Reserve will cut interest rates more than the market expects, potentially reducing U.S. Treasury yields. A similar situation is expected for Europe and the United Kingdom.
The analysts also note that potential economic downside risks from trade and immigration reforms could lead to a downward trend in the shorter end of the U.S. Treasury yield curve, thereby steepening the overall yield curve.
