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Morgan Stanley following the FOMC this week:

  • Absorbing the message from the FOMC, we think
  • (1) market's terminal rates can keep repricing higher closer toward the dots, possibly reaching 3%,
  • and (2) markets will be biased to pricing 50bp hikes in May and/or June, supporting curve flatteners and ultimately inverted curves.
  • We continue to suggest 2s10s and 2s30s flatteners,
  • We extend the target on our long USD/JPY trade recommendation from 120 to 125