Bloomberg writes that Morgan Stanley (MS), the firm targeting a 2 percent market-share gain in fixed-income trading this year, was burned by a wager on U.S. inflation expectations in the second quarter, three people informed of the dealings said.
The bank’s interest-rates trading group lost at least tens of millions of dollars on the trade, which the firm has been unwinding, two of the people said, declining to be identified because the transaction isn’t public. Mary Claire Delaney, a Morgan Stanley spokeswoman, declined to comment.
Traders at the bank bet that inflation expectations for the next five years would rise in Treasury markets, while forecasts for the next 30 years would fall, according to two of the people. Such wagers on so-called breakeven rates involve paired purchases and short sales of Treasuries and Treasury Inflation Protected Securities, or TIPS, in both maturities.
The loss is a setback for Morgan Stanley…
Find out more at http://www.bloomberg.com/news/2011-06-29/morgan-stanley-said-to-suffer-trading-loss-after-wager-on-u-s-inflation.html
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