Welcome to Thoughts in the Market.

I'm Andrew Sheets, Chief Cross-Asset Stragist for Morgan Stanley.

Along with my colleagues bringing you a variety of perspectives, I'll be talking about trends

across the global investment landscape and how we put those ideas together.

It's Friday, February 5th at 2pm in London.

At Morgan Stanley, we're forecasting US 10-year bond yields, derives by about half a percent

this year.

And we're also forecasting a record amount of government bond issuance.

So is all that borrowing the reason why we think interest rates move higher?

For the most part, no.

Governments are different from you and I.

For countries that borrow in their own currencies, such as the United States, the United Kingdom,

or Japan, time and again we see just a little relationship between how much they're borrowing

and how much they pay.

Take the US, for example, which paid twice as much to borrow in 2000 when the government

was running a surplus, then it did in 2008 when the financial crisis caused an enormous

government deficit.

Meanwhile, in the last 20 years, Japan has had some of the highest government debt levels

in the developed world with some of the lowest borrowing costs.

Several factors help explain this paradox.

First, bond yields tend to be driven far more by the state of the economy, as we can contrast

the boom in the US in 99 in 2000 with the US recession in 2008.

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