Welcome to Thoughts on the market. I'm Andrew Sheets, Chief Cross Asset Strategyist for Morgan Stanley.

Along with my colleagues bringing a variety of perspectives, I'll be talking about trends across the global investment landscape and how we put those ideas together.

It's Thursday, December 10th at 6 p.m. in London.

One of the biggest debates for the year ahead is around interest rates and specifically how much they'll rise.

At Morgan Stanley we think the yield on the benchmark US 10-year government bond will rise

about half a percent to a yield of about one and a half percent.

That's more than what the market and many investors expect.

So why do other investors expect yields to rise less?

Well, some aren't as optimistic as we are about the U.S. or global economy next year.

And since yields and economic activity tend to rise and fall together this is a natural

place for honest disagreement.

But there's another different type of skepticism towards higher interest rates.

This camp agrees that growth will improve next year, but they don't think that yields arise as much as we expect because the Federal Reserve wouldn't allow that to happen.

This idea that the Fed would prevent a rise in interest rates is pretty common in the market, but we think it's wrong.

Not wrong, we'd stress

because it assumes the Federal Reserve would prefer interest rates to be low,

we think they do, but wrong because it would imply a pretty material leap in action,

a leap that's both risky and potentially unnecessary.

It's a material leap because the Fed hasn't explicitly tried to fix long-term interest rates at a specific level

since the aftermath of the Second World War. And there's a reason for that.

Intervening in markets is based on confidence.

Once you pick a level for long-term interest rates to defend,

...