Bond advice from Morgan Stanley and JPMorgan

Morgan Stanley and JPMorgan are advising investors to start buying five-year U.S. Treasuries. The two major Wall Street firms are advising investors to start buying five-year U.S. bonds after they saw their worst decline since May last week. Morgan Stanley sees room for a recovery in Treasuries amid expectations that data could surprise to the downside in the coming weeks. JPMorgan is advising investors to buy five-year bonds as yields climb to levels last seen in December, but it warned that markets are still too aggressive in pricing in early central bank rate cuts. “This is the ‘bearish’ we want to buy. With less fiscal support and much colder weather, there are downside risks to U.S. activity data in February,” analysts including Matthew Hornbach, head of global macro strategy at Morgan Stanley, wrote in a Jan. 20 note. Five-year U.S. Treasury yields rose 22 basis points last week to their highest level since May 19, while market participants have scaled back expectations that the Fed will cut interest rates this year. The next round of U.S. Treasury auctions, including two-, five- and seven-year notes, are scheduled to begin Tuesday, adding to the pressure on yields for those segments of the market.