Along the lines of Dan’s post, I thought that this was a pretty interesting research document from Morgan Stanley that came out last week.

In a nutshell, the main conclusions were as follows:

First, this year’s MacroVision consensus believed there is no bond bubble — at least not in the traditional sense we might think of one.

That’s especially true of government bonds, which were thought to be underpinned by generally well-behaved inflation, relatively well-positioned central banks, and a demographically inspired bid from pension funds noted below. Riskier assets — especially high-yield, emerging market, and even investment-grade corporate paper — were perceived as being more vulnerable. But any subsequent widening of spreads was not feared to be as market-disruptive an event as was the case in 1994 and again in 1998. The group felt that this would be the first Fed tightening cycle where someone didn’t go through that proverbial windshield.

Second, there was little doubt as to who would take the baton in a post-US centric world — it would be another encore for America. There was deep conviction that no one comes close to having such an ideal system — especially in terms of technology, the work force, and America’s unique risk-taking culture. Market depth and flexibility — in both the financial and the nonfinancial realms — was depicted as the icing on the cake for yet another run of US-centric global growth. Eric Chaney and I made the case for productivity convergence between the US and Europe — as America eased off on IT-enabled capital deepening just when Europe was finally getting religion on this count. A few eyebrows were raised, but there was far more skepticism than conversion. The group felt any shifts in global leadership would occur at a snail’s pace. Memories had apparently dimmed over how quickly the pendulum had swung away from Japan to Germany in the late 1980s.

Third, the demographic threat was generally not viewed as a serious problem for economies or financial markets over the next few years.

With the debate heating up on global pension reform and US social security privatization, we thought the time was finally right to grapple with this weighty issue. The group didn’t bite. They argued that this should be viewed not as a demographic problem but as more of a regulatory and political challenge that had important implications for the social policies of immigration and retirement ages. The MacroVision consensus did concede that the asset-liability mismatch has important implications for moves into long-duration fixed-income assets, but concluded that any such shifts were likely to be glacial. As one investor put it, “The demographic clock has plenty of ticks until the alarm goes off.”