Morgan Stanley (MS) to Record Large Loss on U.S. Inflation Bet
Tweet Send to a FriendGet Alerts MS Hot Sheet
Price: $24.25 -1.82%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 0.8%
Revenue Growth %: +22.6%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 0.8%
Revenue Growth %: +22.6%
Trade MS Now!
Sources Monday say Morgan Stanley (NYSE: MS) is set to suffer a greater-than-expected loss on a bet on U.S. inflation. While rumors can't pinpoint the loss, three people familiar with the story said it will be "at least tens of millions."
The firm's interest-rates trading group bet inflation expectations in shorter-term Treasuries would increase while 30-year rates would fall. The wagers on "breakeven rates" involve paired purchases and short sales of Treasuries, TIPS, or both, according to Bloomberg.
The group, run by former Goldman Sachs (NYSE: GS) employee Glenn Hadden, posted trading revenue half that of competitors. In February, CEO James Gorman said improving fixed-income trading was his top priority.
Falling crude prices coupled with a strong 30 year TIPS auction befell the unit last week.
Crude prices disproportionately affected five-year TIPS due to their fewer remaining interest payments. According to Bloomberg, the five-year breakeven rate fell from 2.04 percent at the end of May to 1.88 percent Monday. Meanwhile, the 30-year breakeven rate climbed from 2.42 percent at the end of May to 2.57 percent Monday, indicating outperformance.
Spread between the 30-year and five-year breakeven rates, which Morgan Stanley was allegedly short, rallied from 19.7 basis points on May 2nd to 69.2 basis points as of Monday.
Morgan Stanley stock is trading nearly 1 percent stronger in pre-market action Wednesday.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
The firm's interest-rates trading group bet inflation expectations in shorter-term Treasuries would increase while 30-year rates would fall. The wagers on "breakeven rates" involve paired purchases and short sales of Treasuries, TIPS, or both, according to Bloomberg.
The group, run by former Goldman Sachs (NYSE: GS) employee Glenn Hadden, posted trading revenue half that of competitors. In February, CEO James Gorman said improving fixed-income trading was his top priority.
Falling crude prices coupled with a strong 30 year TIPS auction befell the unit last week.
Crude prices disproportionately affected five-year TIPS due to their fewer remaining interest payments. According to Bloomberg, the five-year breakeven rate fell from 2.04 percent at the end of May to 1.88 percent Monday. Meanwhile, the 30-year breakeven rate climbed from 2.42 percent at the end of May to 2.57 percent Monday, indicating outperformance.
Spread between the 30-year and five-year breakeven rates, which Morgan Stanley was allegedly short, rallied from 19.7 basis points on May 2nd to 69.2 basis points as of Monday.
Morgan Stanley stock is trading nearly 1 percent stronger in pre-market action Wednesday.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
You May Also Be Interested In
- UPDATE: Crash in American Electric Power (AEP) & NextEra Energy (NEE) Adds to Jitters
- UPDATE: GameStop (GME) Slides Into Close
- UPDATE: Shares of Sony (SNE) Spike; Considers Spinning Entertainment Arm
Create E-mail Alert Related Categories
Corporate News, Trader TalkRelated Entities
Morgan Stanley, Crude Oil
Login with Facebook
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
