Morgan Stanley Fixed-Global Macro Commentary September 11-110286971

M Update Global Macro Commentary | Global September 11Morgan Stanley & Co. LLCAlexandra MaierStrategist Alexandra.Maier@morganstanley.com +1 212 761-0428 Morgan Stanley & Co. International plc+Dominic J KrummenacherStrategist Dominic.Krummenacher@morganstanley.com +44 20 7425-9781 Morgan Stanley & Co. LLCLenoy DujonUS/Canada Economist Lenoy.Dujon@morganstanley.com +1 212 761-2779 Morgan Stanley & Co. International plc+Lorenzo TestaStrategist Lorenzo.Testa@morganstanley.com +44 20 7677-0337 Morgan Stanley MUFG Securities Co., Ltd.+Hiroki YagiResearch Associate Hiroki.Yagi1@morganstanleymufg.com +81 3 6836-5412 Morgan Stanley Asia Limited+Gek Teng KhooStrategist Gek.Teng.Khoo@morganstanley.com +852 3963-0303 Morgan Stanley & Co. International plc+Arnav GuptaStrategist Arnav.Gupta@morganstanley.com +44 20 7677-0382 Beat in US core CPI; USTs bear-flatten after volatile price action; BoJ's Nakagawa reiterates hawkish BoJ stance; gilts outperform after soft UK GDP; Riksbank's Breman says inflation is stabilizing; MXN rallies; DXY at 101.73 (0.1%); US 10y at 3.653% (+1.1bp).• August US core CPI surprises to the upside at 0.3% m/m (C: 0.2%; P: 0.2%) with a re-acceleration in OER primarily driving the beat; STIR pricing implies higher probability of a 25bp Fed cut in September.• Tumultuous intraday movement in USTs with robust CPI pushing yields higher, only to be offset by risk-off sentiment; USTs ultimately bear-flatten (2s10s: -3bp) alongside a rebound in risk.• USD/JPY falls over 1% during the Tokyo session, following the US presidential debate and a hawkish interpretation of BoJ Board Member Nakagawa’s comments reiterating the intention for the BoJ to hike rates further; JGBs rally with outperformance in the belly of the curve alongside the strength in JPY.• Gilts rally (10y: -6bp), outperforming European duration, while EUR/GBP rises 0.3% after UK GDP unexpectedly stalled for the second month in a row.• Ahead of Sweden’s August CPI release, Riksbank First Deputy Governor Breman says “inflation is now well on the way to stabilizing close to the target” but cautions against paying too close attention to individual monthly outcomes.• Following the widely expected passage of Mexico’s constitutional reform of the judicial system, MXN (-1.4%) rallies after a lack of MXN-specific catalysts during the US presidential debate.Please refer to our latest Global Macro Strategist (Super Size Me), Global EM Strategist (Will a Cut Cut it?), as well as our recent publications and collaborations (Global Macro Strategy: G10 FX Chart Pack).Developed Markets United States: Price action had some sharp turns on Wednesday amid reversals of risk-sentiment throughout the session. Highlights from the overnight session included market participants' reaction to the US presidential debate and to BoJ Board Member Nakagawa’s fairly hawkish speech, where she reiterated the BoJ’s intention to raise the policy rate further once the central bank is sufficie