Local-currency bonds, which have been one of the asset class’ best trades this year, are also seen gaining further amid lower US Treasury yields. The global backdrop might allow for central banks to cut rates if warranted “without having to worry too much about currency weakness,” they said.
Some of Morgan Stanley’s favorite trades include wagering that the Chilean peso will strengthen against the dollar, scooping up Hungary’s local bonds due in 2030 and betting on lower Brazil yields.
“Brazil remains our favorite market for receivers” in Latin America, strategists wrote, adding that they see lower interest-rate swaps maturing in 2029 and like inflation-linked government bonds due in 2028.
