Morgan Stanley's latest report suggests a strategic shift towards US Treasuries, anticipating a March rate cut by the Federal Reserve. The bank's economists expect the 12-month core PCE inflation rate to decrease, supporting a 25 basis point cut. "Our economists expect realized inflation to fall while most investors worry about inflation rising," the report notes. This outlook has led Morgan Stanley to recommend buying 5-year US Treasuries, as the anticipated post-election rise in Treasury yields presents a buying opportunity. The strategists also suggest selling 10-year TIPS breakevens, citing their rich valuation on a beta-weighted basis. The report highlights that the prospect of lower Treasury yields could weaken the US dollar, recommending selling the USD against the euro, British pound, and Japanese yen. As the market prices in these expectations, Morgan Stanley emphasizes the importance of positioning for a potential rate cut, which could further support lower yields and a weaker dollar.