摩根士丹利-全球-宏观策略-全球利率策略：待久一点要有耐心-2019.3.9-57页.pdf

Matthew.HGuneet.DTony.SSam.EDavid.G.HShreya.CRobert.J.BKoichi.SShoki.OMORGAN STANLEY&CO.LLCMatthew HornbachSTRATEGIST+1 212 761-1837Guneet Dhingra,CFASTRATEGIST+1 212 761-1445Tony SmallSTRATEGIST+1 212 296-5876Sam ElprinceSTRATEGIST+1 212 761-9491David HarrisSTRATEGIST+1 212 761-0087MORGAN STANLEY&CO.INTERNATIONAL PLC+Shreya ChanderSTRATEGIST+44 20 7425-4740Robert J BrownSTRATEGIST+44 20 7425-4638MORGAN STANLEY MUFG SECURITIES CO.,LTD.+Koichi SugisakiSTRATEGIST+81 3 6836-8428Shoki OmoriSTRATEGIST+81 3 6836-5466Please click here if you would like to receive our dailyinterest rate market commentary:the TreasuryMarket Commentary.Global Interest Rate StrategistGlobal Interest Rate Strategist|Global GlobalStay Long,Stay PatientThe bulls are back in control,but are unlikely to stampedeuntil the March FOMC meeting in 1 weeks.We continue tolike duration longs in the US via notional neutral 2s5sflatteners,and now we like JGBs again.We stick with 2s10seuro swap flatteners and 20s40s JGB flatteners.Government BondsIn the US,we offer four facts that give a different perspective on supplyand demand in the Treasury market.We discuss US household net worthand its historical impact on personal consumption and UST 2y yields.In theeuro area,we explore a scenario where inflation rebounds in the back halfof the year and the risks leading to“pervasive uncertainty”subside.In Japan,we discuss recent activity by investors in non-yen assets.InflationIn the US,we stay neutral on breakevens while continuing to suggest beinglong 5-year real yields.We take a closer look at extracting relative value infront-end TIPS,by comparing them to CPI fixings,a metric which istradeable and observable historically.We suggest long July19s breakevensvs.selling the May CPI fixing.Money MarketsIn the US,we discuss the potential of a Fed repo lending facility and whythe ability of such a facility to cap the rise in repo rates at quarter-ends willbe substantially impaired if the Fed does not switch to clearing its repolending to dealers in tandem with the creation of the facility.DerivativesIn the US,systematic 1m10y straddle selling strategies maintained a Sharperatio of around 1.3 over the past 10 years with consistent returns in mostyears.We explore the historical performance of butterfly trades as analternative way to sell vol.A systematic butterfly buying strategy has thebenefit of being short vol with limited downside and no need for deltahedging.Technical AnalysisUST 10y:short-term bullish.Below 2.63/2.61%,we look to 2.54%as the nextresistance,then 2.49%,2.37%,2.34%,2.31%,and 2.27%.DBR 10y:short-termbullish.We look to-0.12%as the next resistance,then-0.16%,then-0.20%.UKT 10y:short-term bullish.We look to 1.12%as the next resistance,then1.10%(the low back in May 2018),1.00%,and 0.95%.JGB 20y:short-termbullish.We see resistance at 0.39%,then 0.35%,and 0.25%.Due to the nature of the fixed income market,the issuers orbonds of the issuers recommended or discussed in thisreport may not be continuously followed.Accordingly,investors must regard this report as providing stand-aloneanalysis and should not expect continuing analysis oradditional reports relating to such issuers or bonds of theissuers.Morgan Stanley does and seeks to do business withcompanies covered in Morgan Stanley Research.As aresult,investors should be aware that the firm may have aconflict of interest that could affect the objectivity ofMorgan Stanley Research.Investors should considerMorgan Stanley Research as only a single factor in makingtheir investment decision.For analyst certification and other important disclosures,refer to the Disclosure Section,located at the end of thisreport.+=Analysts employed by non-U.S.affiliates are not registered withFINRA,may not be associated persons of the member and may notbe subject to NASD/NYSE restrictions on communications with asubject company,public appearances and trading securities held bya research analyst account.1March 9,2019 12:19 AM GMT Government BondsUnited StatesWe offer four facts that give a different perspective on supply and demand in theTreasury market.(1)China has not purchased US Treasuries,on a cumulative netbasis,since June 2015.China has net sold$189bn Treasuries since 2015.(2)AnnualUS Treasury supply-net of Federal Reserve activity-has almost doubled(anincrease of 98%)since 2015.(3)The Federal Reserve has hiked rates by 25bp on 9occasions for a total increase of 225bp since June 2015.(4)The yield on theconstant maturity 10y US Treasury note is higher by 30bp and the 10y termpremium is lower by 85bp since June 2015.These facts should humble Treasurybears and embolden Treasury bulls.We discuss US household net worth and its historical impact on personalconsumption and UST 2y yields.Household net worth fell dramatically in 4Q18 inline with poor performance for US risk markets,dropping 3.45%on the quarter,forits worst quarterly loss since 4Q08.the Y/Y change in household net worth hashad a strong 2 quarter lead on Y/Y changes in nominal personal consumptiondating back to the early 1990s.If the historical relationship holds,nominalpersonal consumption could slow over the next couple of quarters and the 2yyield would end 2Q19 about 50bp below where it ended 2Q18-placing it around2.00%.We remain bullish on US Treasury duration,both outright and cross market via theRyder Cup of Bonds trade.We continue to suggest UST 2s5s notional neutralflatteners.Euro areaIn the euro area,we suggest that investors maintain positions in 2s10s euro swapflatteners post the ECB meeting,following the introduction of TLTRO-III andchanges to the ECBs forward guidance to“through the end of 2019”.We highlightthat the strong rally in duration and flattening in curves post the ECB was likelydriven by two factors “pervasive uncertainty”that kept growth risks tilted todownside despite the forecast downgrades and an acknowledgment by the ECBthat a later lift off for rates meant balance sheet reinvestment would occur forlonger.We explore whether the ECB have positioned themselves for an upside surprisenear the end of 2019,as inflation rebounds in the back half of the year,the risksleading to“pervasive uncertainty”subside and markets begin to question whyforward guidance for the key ECB interest rates was only pushed back fromSeptember to December,despite substantial downgrades to growth and inflationforecasts.JapanWe tactically took off our bullish duration call last week on the back of concern atfurther potential rinban reduction and higher overseas yields triggered by upsidesurprise in some economic data.However,we now feel comfortable switching backfrom neutral to bullish on super-long JGBs again,now that most catalysts which2may drive the rates higher are now out of the way.We maintain our 20s40sflattener positions.We also take account of recent Japanese investors activity in foreign assets.Webelieve that Japanese investors continue to export their ample capital in search ofyield,and we see no immediate prospect of this changing unless investmentappetites end up being quashed entirely by a fully fledged global recession.United StatesMORGAN STANLEY&CO.LLCMatthew HornbachMatthew.H+1 212 761-1837Tony SmallTony.S+1 212 296-5876Supply,demand,and some perspective on the Treasury market since June2015We recently published on the idea that China would run a structural current accountdeficit going forward from the structural current account surpluses of the past(see TheTransformation of Chinas Capital Flows).Since then,investors have asked us whetherthis would reduce Chinas demand for US Treasuries?And,if so,how much will theTreasury supply vs.demand picture change?First,we want to calm investor nerves.While in 2019 China is likely to see its first annualcurrent account deficit since 1993,we see that China is still running a large currentaccount surplus with the United States as recently as 2018(see Exhibit 1).Exhibit 1:Current account balance between the US and its major trading partners-800-600-400-2000200400600800ChinaEUMexicoCanadaJapanUS$billionsGoods ExportsGoods ImportsServices ExportsServices ImportsGoods&Services BalanceSource:Morgan Stanley Research,Haver Analytics3Second,we assure investors that lack of buying from China in the US Treasury marketshould not be a concern.The following perspective,using June 2015 as a starting point,makes the case:China has not purchased US Treasuries,on a cumulative net basis,since June 2015.China has net sold$189bn Treasuries since 2015(see Exhibit 2 and Exhibit 3).Exhibit 2:Cumulative monthly net purchases of USTreasuries from Mainland China since December 20000100200300400500600700800Dec-00Dec-03Dec-06Dec-09Dec-12Dec-15Dec-18Cumulative monthly UST purchasesUS$billionsJune 2015Source:Morgan Stanley Research,US TreasuryExhibit 3:Cumulative annual net purchases of USTreasuries from Mainland China since the year 2000-200-150-100-500501001502002000 2002 2004 2006 2008 2010 2012 2014 2016 2018Cumulative net UST purchasesUS$billionsSource:Morgan Stanley Research,US TreasuryAnnual US Treasury supply-net of Federal Reserve activity-has almost doubled(an increase of 98%)since 2015(see Exhibit 4).Exhibit 4:Annual US Treasury supply,Federal Reserve activity,and the Top 10 buyers ofTreasuries in 20182015201620172018Marketable Treasury securities6887115541132Federal Reserve02-9-232Marketable USTs less Fed6887095641363Households30424112580MMFs64312-95171Broker dealers53222132Mutual Funds155-2221598US banks1596-4387RoW43-10830784ETFs14142759Private pensions-13202552FBOs1324627Holding companies-40413Source:Morgan Stanley Research,Federal ReserveThe Federal Reserve has hiked rates by 25bp on 9 occasions for a total increase of225bp since June 2015(see Exhibit 5).The yield on the constant maturity 10y US Treasury note is higher by 30bp and the10y term premium is lower by 85bp since June 2015(see Exhibit 6).4In summary,less Treasury demand from China,double the amount of Treasury supply,225bp of rate hikes,and 10y yields are only 30bp higher and 10y term premiums are85bp lower.These facts should humble Treasury bears and embolden Treasury bulls.When households feel a bit less wealthy,we feel a bit more bullishUS household net worth fell dramatically in 4Q18 in line with poor performance for USrisk markets,dropping 3.45%on the quarter,for its worst quarterly loss since 4Q08.Thedecline took the level of household net worth to its lowest level in a year,with thenominal value falling more than$3.7 trillion on the quarter,and erasing all of thehousehold net worth gains realized during the first 3 quarters of 2018.While a fair amount of the losses realized in 4Q18 will likely be recovered in 1Q19 due tothe rebound in global equity markets,we highlight that the speed at which householdnet worth has been expanding is falling quickly.As shown in Exhibit 7,the Y/Y change in household net worth has had a strong 2 quarterlead on Y/Y changes in nominal personal consumption dating back to the early 1990s.Ifthe historical relationship holds,nominal personal consumption could slow over thenext couple of quarters.Importantly,a full recovery or even small expansion in household net worth during2019 would not materially change the outcome implied by the historic relationship.Thespeed at which household net worth is expanding will still be very low at best,with therisk being that it turns negative in Y/Y terms if the equity market recovery begins to stallout(as currently appears to be the case).Exhibit 5:Target fed funds rate upper bound since 2015Source:Morgan Stanley Research,Federal ReserveExhibit 6:CMT 10y yield and 10y term premiumSource:Morgan Stanley Research,Federal Reserve5The tightness of this leading relationship relative to consumption suggests the presenceof a wealth effect.Households tend to slow,delay,or alter consumption patterns witha lag following periods when gains in financial and real estate assets have slowed ordeclined.We believe that there is already evidence of this wealth effect playing out inthe economy,given the softness in the housing market and the more recent significantdecline in December retail sales.This idea that consumption growth may slow in the coming quarters due to a wealtheffect further strengthens our already bullish view on US duration.As we highlighted inYield Compression Has Begun,a material deceleration in the rate of household networth has also been correlated with movements in the UST 2y yield.A drop in the Y/Ygrowth of household net worth,even in a scenario in which wealth recovers,would beconsistent with further downside in UST 2y yields.In fact,if the relationship with the decline in the Y/Y growth rate of household networth holds,the 2y yield would end 2Q19 about 50bp below where it ended 2Q18-placing it at around 2.00%.Such an outcome would be closer to our bull case forecastfor the 2y yield(1.80%)than our base case at 2.40%by year-end(see Marking DownOur Yield Forecasts Again).At the same time,such a deceleration in personalconsumption is not what our economists forecast in the base case either.Trade idea:Maintain long US(TY)and Canada(CN)futures vs.short Germany(RX)and gilt(G)futuresTrade idea:Maintain short 2y notes vs.long 5y notes,notional neutralExhibit 7:Household net worth Y/Y vs.personal consumption Y/Y-4-20246810-20-15-10-505101520199119931995199719992001200320052007200920112013201520172019Households net worth Y/Y(Adv 2 quarters)Personal consumption Y/Y(rhs)%Source:Morgan Stanley Research,BEA,Federal Reserve,Haver Analytics6 Euro areaMORGAN STANLEY&CO.LLCTony S+1 212 296-5876MORGAN STANLEY&CO.INTERNATIONAL PLCShreya ChanderShreya.C+44 20 7425-4740At the 7 March 2019 Governing Council meeting,the ECB introduced a series of easingmeasures tied to the significant reductions in both growth and inflation forecastsrelative to the ECBs December outlook.Specifically,the ECB altered its forwardguidance for rates to“through the end of 2019”from“at least the summer of 2019”,highlighted that pushing back rate guidance meant a longer period of balance sheetreinvestment,and introduced the framework for a new quarterly 2y TLTRO-III that isexpected to begin in September 2019(albeit on less favorable terms than previousTLTROs).The additional easing measures came on the back of substantial downgrades toforecasts for 2019 GDP growth and inflation.Specifically,the ECBs forecast for 2019GDP growth was revised down to 1.1%in March from 1.7%in December,while theforecast for inflation was lowered to 1.2%from 1.6%in December.Forecasts for growthand inflation were also reduced in 2020.Additional key points from the meeting clarified during the Q&A included the following:The weaker outlook for growth was seen as“probably”,slowing the momentum ofinflation to the ECBs aims and delaying“the pass-through from higher nominalwages to higher prices.”Risks to the outlook remained tilted to the downside despite the significantforecast revisions due to the“pervasive uncertainty”surrounding risks to theoutlook that were out of the ECBs co