[Morgan Stanley Recommends Betting on Fading Fed Rate Hike Expectations] Morgan Stanley's rate strategists recommend that as expectations for Federal Reserve rate hikes diminish, investors should bet on the decline in yields of shorter-term U.S. Treasuries relative to longer-term ones. The result would be a steepening of the U.S. Treasury yield curve, meaning the spread between shorter-term and longer-term yields would widen. Specifically, on July 2, Morgan Stanley recommended betting on the widening spread between 7-year and 30-year U.S. Treasury yields. This spread was near 65 basis points during Monday's U.S. trading session, compared to 63 basis points when Morgan Stanley made the recommendation. The bank set a target for the spread at 100 basis points. Although the weak June employment data released on July 2 prompted the U.S. rates market to lower its pricing of the Fed's tightening magnitude, strategists including Matthew Hornbach wrote that market pricing remains too high. "The combination of weaker employment data and current market pricing creates an opportunity for investors to reposition for a steepening U.S. Treasury curve trade," they wrote.