The big bond gurus of Wall Street, Bill Gross and Jeffrey Gundlach, both struck fear in the hearts of bond investors yesterday, saying that the recent Treasury sell-off confirmed that a bond bear market had begun. However, Morgan Stanley is now pushing back against that assertion, saying that Treasuries are still offering value and should be fine. “This isn’t the bear market you’re looking for” says Morgan Stanley. MS says that the Fed is not likely to react sharply to inflation and that the Chinese aren’t going to stop buying Treasuries outright, both factors which will support the market.
FINSUM: While there are some headwinds related to possible tightening, on the whole there are a number of fundamentals which seem likely to continue to support both Treasuries and credit (like demographics—we know we often mention this point).