MARKET OUTLOOK - U.S. 10-Year Treasury Yield Set to Decline to 3.75%

Morgan Stanley (NYSE:MS) Research stated, "We recommend an overly long position on most government bonds in the first half of 2025." They expect that the yields on U.S. Treasury bonds will drop to 3.75% by mid-2025 due to forecasts that the Fed will implement more interest rate cuts than what the markets have priced in. A similar situation is occurring in Europe and the UK as well. The potential downside risks of trade and immigration reforms on growth imply that the short end of the U.S. Treasury yield curve is likely to decline, while the U.S. yield curve is expected to steepen.