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U.S. Yield Curve to Invert in Mid-2019, Morgan Stanley Says

Chris Anstey
U.S. Yield Curve to Invert in Mid-2019, Morgan Stanley Says

The Federal Reserve next March will probably map out an end to the contraction in its balance sheet, helping support longer-dated bond yields, which will drop below those on shorter-dated notes by the middle of 2019, according to Morgan Stanley. “Investors are underestimating the size of the SOMA portfolio” that will be needed to keep the benchmark overnight interest rate within the range targeted by the Fed, Morgan Stanley strategists including Sam Elprince wrote in a July 12 note. SOMA refers to the System Open Market Account, the Fed’s name for its pool of assets.