Report published September 24, 2026
New US Treasury Yield Forecasts After New Fed Call: Morgan Stanley Rates Strategy
Morgan Stanley · September 24, 2026
Morgan Stanley projects the Fed will stop hiking after 25bp moves in December 2026 and March 2027, leaving the policy rate at 4.25-4.50%. Consequently, 10-year US Treasury yields are forecast to decline to 4.70% by end-2027, roughly 30bp below forwards, with risks heavily skewed toward lower yields.
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Finvaulta summarizes Morgan Stanley's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.
Key Takeaways
- 1.The 10y UST yield closely tracks market pricing of the Fed path, meaning higher yields require a more hawkish policy path than is currently priced.
- 2.Markets price an end-2027 upper bound of 4.73%, compared to Morgan Stanley's economists' probability-weighted path of 4.41%, which assigns higher odds to cuts in 2H27.
- 3.As the Fed holds at its terminal rate and core PCE inflation slows in 2027, 2y yields are projected to fall faster than 10y yields, steepening 2s10s to roughly 20bp by year-end 2027.
Table of Contents
- US Treasury forecasts: below forwards, with risks skewed lower
- The market's Fed path explains the 10-year yield
- Our economists' five scenarios anchor the Fed path
- A recession would pull yields lower and steepen the curve
- A demand shock would lift the front end and invert 2s10s
- Scenario risks skew toward lower Treasury yields
- Oil prices could flip the sign of the yield response
- A higher Fed path would lift our forecasts above forwards
- US Treasury swap spreads: rangebound, modestly tighter
Report data
Morgan Stanley US Treasury yield forecasts: probability-weighted base case — as of September 23, 2026.
| Metric | Estimate | Context |
|---|---|---|
| 10-Year US Treasury Yield Forecast (Base Case End-2027) | 4.70% | Baseline end-2027 forecast compared to 5.11% on September 23, 2026. |
| 2-Year US Treasury Yield Forecast (Base Case End-2027) | 4.50% | Baseline forecast compared to 4.85% on September 23, 2026. |
| Market Implied Fed Funds Target Upper Bound (End-2027) | 4.73% | Market pricing of the fed funds target rate upper bound at end-2027. |
| Probability-Weighted Policy Path Upper Bound (End-2027) | 4.41% | Morgan Stanley economists' probability-weighted policy path for the upper bound at end-2027. |
| 10-Year US Treasury Yield Bull Case (End-2027) | 3.80% | Yield in the bull case (oil-led recession scenario). |
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