Via Bloomberg come comments from Morgan Stanley. Nothing surprising in these, but a useful reminder after the US session where the gap between 2-year and 10-year US Treasury yields inverted for the first time since 2007

  • inversion of 2-yr/10-yr curve is "bad for risk appetite"
  • likely to strengthen the yen, CHF, Swiss franc*
  • "This is when bear markets start"

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I put a little star up there 'cause MS expect it to be a positive for EUR also, which of course was not the case in US time trade. MS cite:

  • EM high yield likely to decline most as the curve inverts
  • MS like the euro because it's been used for funding purchases of EM assets and could benefit as those trades are unwound

As a ps. in their latest FX Pulse (last week) MS sais:

  • The EUR has joined the countercyclical club. The EUR seems to be joining the JPY and CHF as currencies catching a bid when risk sells off.