183. Fixed Income Strategy 101 Feat. Morgan Stanley's Global Head Macro Strategy, Matt Hornbach

Sep 20, 2025

Matt Hornbach, Global Head of Macro Strategy at Morgan Stanley, shares insights on the recent FOMC rate cut and its market implications. He explains the Fed’s third mandate and why lower long-term treasuries might not bolster the economy. Matt discusses his favored yield-curve steepener and predicts further dollar depreciation. He also sheds light on the essential skills for aspiring strategists, such as Python, and the career paths within fixed income strategy that one can pursue.

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ADVICE

Favor A Cost-Optimized Curve Steepener

Position for a bull steepener as Fed cuts push short rates down more than long rates.
Structure the trade to minimize carry cost and avoid overpaying for near-term performance.

INSIGHT

Use Treasuries To Reduce Steepener Carry

Expressing steepener views in Treasuries costs less carry than via SOFR swaps.
Treasury-based expressions also avoid swap-curve premium and expected issuance timing issues.

INSIGHT

Dollar Depreciation Likely To Continue

Morgan Stanley called for a weaker dollar earlier and expects more depreciation ahead.
Lower Fed rates and cheaper currency hedges should accelerate dollar declines roughly another ~10%.

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The day after the FOMC’s first rate cut of 2025, we sat down with Matt Hornbach, Global Head of Macro Strategy at Morgan Stanley, to unpack what the decision really meant, and what the markets maybe got wrong on first read. Matt talks about the shifting dissenters, how updates to the Summary of Economic Projections present a more complicated picture for the future path of rate cuts, and why Powell’s tone at the presser felt at odds with the statement itself.

We also dig into the Fed’s often-misunderstood, rarely referenced “third mandate” (moderate long-term rates), the limits of yield curve “engineering,” and the crucial point that U.S. mortgage rates don’t simply follow 30-year Treasury yields.

We dive into Matt’s favored yield-curve steepener, going into the details of preferred expressions optimized for minimal cost of carry. Beyond rates, he explains why he expects further USD depreciation and gives us a rates-based framework to understand what sometimes feels like puzzling strength in the equities market.

This episode is also our “Fixed Income Strategy 101” primer, where we cover: what macro/fixed-income strategy teams actually do, how they partner with sales & trading and clients, the difference between research/strategy/desk strategy, the top skills hiring managers look for (hint: learn Python), and common exit paths.

Matthew Hornbach is a Managing Director at Morgan Stanley, Global Head of Macro Strategy, and one of nine members of the Global Investment Committee for Morgan Stanley Wealth Management. With support from his team, Matthew received the most individual or firm votes in the 2021, 2022, 2023, and 2024 Institutional Investor Global Fixed-Income Research poll across all analysts across all Economics & Strategy categories.

Matthew began his career at Morgan Stanley in June 2000. He joined as a Japanese Government Bond (JGB) trader in Tokyo, then became a yen interest rate strategist. Matthew moved to New York in 2004 to make markets in Treasury Inflation Protected Securities (TIPS). He returned to Tokyo in 2006 to develop the US Agency MBS Pass-throughs business in Asia. In 2012, Matthew returned to New York as Head of U.S. Rates Strategy and became the Global Head of Rates Strategy s

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