Morgan Stanley Finds Less Treasuries Liquidity on War Volatility

Interest-rate strategists at Morgan Stanley say this month’s Treasury market slump has hallmarks of forced selling of two-year notes, whose yields soared as traders abandoned wagers on Federal Reserve interest-rate cuts and began to price in a hike.

Trade data from BrokerTec Inc. — the interdealer trading platform owned by CME Group Inc. — for the period since the US attacked Iran on Feb. 28 shows “clear evidence of reduced liquidity in the Treasury market, particularly in the front end,” Morgan Stanley strategists led by Eli Carter said in a report Wednesday. Longer-maturity tenors such as 10-year notes have enjoyed relative stability, they said.