It is a payment of last resort from the bank, and ideally, is never meant to be used.

Citi recently took a deep dive into why 10-year yields are still so low.X2 A Standby Letter of Credit (SBLC / SLOC) is a guarantee that is made by a bank on behalf of a client, which ensures payment will be made even if their client cannot fulfill the payment.

'The inflection TIPS carry makes shorting TIPS attractive.'

'We maintain our bias for higher yields after the September FOMC, given the upward movement in dots, as well as inflections of GDP growth and COVID cases,' they say.

Morgan Stanley recommends shorting 5-year inflation protected Treasuries (NYSEARCA: TIP).

Real yields catch up to the strong growth environment, ending 2022 at -0.3%.' 'As commodity prices come off the boil and base effects drive CPI inflation lower, the demand for 'inflation protection' wanes, and inflation risk premiums decline from their very lofty valuations.

'Even though the Fed is patient, we see real yields rising notably in 2022, outpacing the rise in nominal yields, while breakevens decline,' they add.

Real yields rise more than nominal yields, and breakevens are lower by the end of 2022.'

'The 5s30s curve and the 10s30s curve bear-flatten.

Continued strong growth in 2022, alongside receding but above-target inflation, keeps the Fed patient, yet gradually moving towards rate hikes, and keeps Treasury yields moving higher.' 'We see 10-year Treasury yields trading around 2.1% by the end of 2022.

'In the US, we expect Treasury yields to move higher over the forecast horizon, driven by rising 5-year and 10-year yields (NYSEARCA: TBT) (NASDAQ: TLT),' the rates strategy team says.

duration, with yields closing out 2022 above their current market-implied forwards.

Patient Fed: In government debt, Morgan Stanley recommends an underweight position on U.S.

'The earnings backdrop for financials is improving, with a strong 3Q earnings season, bottoming relative earnings revisions breadth and accelerating forward EPS growth,' they note.

The stocks are historically undervalued and should benefit from higher nominal yields. Financials (NYSEARCA: XLF), recommending a long position with 5% potential upside.

'In effect, US equities have been large relative beneficiaries of the secular stagnation environment of the last cycle, but a shift towards stronger nominal growth in this new cycle (which would be consistent with higher real yields) makes a return to pre-GFC performance patterns more plausible.'.

'US equity underperformance has been rare post-GFC, but the secular backdrop may be shifting: After a decade of strong and steady outperformance from US stocks, the potential for their sizeable underperformance versus global peers may seem unlikely, but it is worth noting that such occurrences were not so uncommon before the GFC,' they write.

Morgan Stanley is overweight Europe and Japan.

Challenges include slower EPS growth and higher valuations compared with global peers.

strategist Mike Wilson predicts the S&P will fall to 4,400 by the end of 2022, a drop of about 6% from current levels.

S&P struggle: Morgan Stanley sees opportunities in equities, but with the S&P 500 ( SP500) (NYSEARCA: SPY), Nasdaq ( COMP.IND) (NASDAQ: QQQ) and Dow Jones ( DJI) (NYSEARCA: DIA) at record highs, they are underweight U.S.

But we think that 2022 is really about 'mid-to-late-cycle' challenges: better growth squaring off against high valuations, tightening policy, rambunctious investor activity, and inflation being higher than most investors are used to.' 'Good growth and moderating inflation would seem like another version of 'Goldilocks', and for some assets we think that the backdrop does look benign.

'Despite strong growth and tightening labor markets, easier year-on-year comparisons and an easing of supply chain pressures mean that we forecast inflation to moderate over the next 12 months,' they say.

'We are above-consensus on 2022 growth in the US, Europe, and China, and see the US unemployment rate falling all the way to 3.6% by the end of 2022.' 'For 2022, we think that this 'hotter and faster' recovery continues, powered by strength in consumer spending and capital investment,' the team of more than 30 strategists writes.Morgan Stanley is out with its global strategy outlook for 2022 when 'the training wheels come off.'.

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