Core Viewpoint - A trend of "selling bonds and buying gold" has emerged, but Morgan Stanley maintains that U.S. Treasuries are a superior long-term choice [1][15] Group 1: Market Dynamics - Foreign official investors have significantly altered their asset allocation, with U.S. Treasuries held in custody by the New York Fed declining by nearly $155 billion from July 30 to October 22, 2025 [1] - During the same period, gold prices surged over 25%, suggesting that foreign official investors may have used proceeds from selling U.S. Treasuries to purchase gold [2] Group 2: Performance Analysis - Despite potential selling pressure, the U.S. Treasury market remains robust, with Treasuries performing well since July [5] - Historical data indicates that gold has underperformed U.S. Treasuries over any given decade in the past 50 years, with specific examples showing gold's negative returns during certain periods [6] Group 3: Volatility Considerations - The report highlights that gold's total return volatility is significantly higher than that of intermediate U.S. Treasuries, making it a questionable choice for central banks focused on managing short- to medium-term Treasury indices [9] Group 4: Long-term Trends - Morgan Stanley expresses no concern over the reduction of U.S. Treasuries held by foreign official investors, noting it as a long-term trend that has seen the proportion of Treasuries held by these investors drop from 41% in mid-2014 to 16% currently [10] - The report emphasizes that the environment for holding U.S. Treasuries is becoming increasingly attractive due to rising economic activity risks, with expectations for lower terminal interest rates from the Federal Reserve [12] Group 5: Investment Recommendations - Morgan Stanley suggests that investors should prepare for an upcoming "shining moment" for U.S. Treasuries, reiterating several trading recommendations, including going long on 5-year U.S. Treasuries and steepening the yield curve [15]