Morgan Stanley Fixed-Global Macro Commentary September 12-110301116

M Update Global Macro Commentary | Global September 12Morgan Stanley & Co. LLCAlexandra MaierStrategist Alexandra.Maier@morganstanley.com +1 212 761-0428 Zoe K StraussStrategist Zoe.Strauss@morganstanley.com +1 212 761-0407 Lenoy DujonUS/Canada Economist Lenoy.Dujon@morganstanley.com +1 212 761-2779 Morgan Stanley MUFG Securities Co., Ltd.+Hiromu UezatoResearch Associate Hiromu.Uezato@morganstanleymufg.com +81 3 6836-8431 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 ECB cuts by 25bp; sell-off in European duration; USTs marginally cheapen; BoJ's Tamura says BoJ policy rate should be at least ~1%; Korea rates underperform in region; risk-sensitive currencies outperform in G10 FX; DXY at 101.25 (-0.4%); US 10y at 3.674% (+2.1bp).• The ECB cuts rates by 25bp as widely expected; forecasts show an anticipated downward revision to growth, but an upward revision to core inflation projections for 2024 and 2025.• European duration sells off (2y Bund: +7bp) as ECB President Lagarde maintains her data-dependent approach to future easing and market participants pare positions for an October ECB rate cut.• August PPI surprises to the upside, but components that feed into PCE are softer than expected; USTs marginally cheapen, ultimately following the move higher in European government bond yields. • BoJ Board Member Tamura states that Japan’s policy rate should be at least ~1% by late 2026 as it is needed "to contain upside price risks and for achieving the stable and sustainable inflation target."• Korea rates underperform, with 2y swap rates up 4bp due to their high correlation with US rates and hawkish remarks from the BoK which continues to strike a cautious tone on cutting rates.• USD weakens as US-European yield differentials move away from the US dollar’s favor, while risk-sensitive currencies outperform in G10 FX (USD/AUD: -0.7%; USD/NOK: -1.3%; USD/SEK: -1.0%). Please refer to our recent publications and collaborations (G10 FX Strategy: The Seatbelt Sign Is On; ECB Review: December Is the Key Meeting, Confirmed; Brazil Economics & Strategy: Central Bank Preview: Let the Hiking Cycle Begin; Global Macro Strategy: US Rate Volatility Screener).Developed Markets United States: Following Wednesday’s rebound in risk sentiment and US equity prices in the NY afternoon, European and Asian equities generally strengthened in the NY overnight session alongside a cheapening in global duration. Hawkish remarks from BoJ Board Member Tamura, who argued that Japan’s policy rater should be at least ~1% in the latter half of the BoJ’s forecast horizon (late 2026), also temporarily supported the move higher in JGB yields.Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict