Morgan Stanley to price annual observation CMS curve-linked notes

By Angela McDaniels

Tacoma, Wash., Aug. 4 - Morgan Stanley plans to price annual observation CMS curve-linked notes due Aug. 26, 2011, according to an FWP filing with the Securities and Exchange Commission.

Interest will be payable annually. If the spread of the 10-year Constant Maturity Swap rate over the two-year CMS rate is greater than or equal to the reference strike on the observation date, investors will receive a 9% to 11% interest payment for that year. The exact rate will be set at pricing. If the spread is less than the reference strike, no interest will be paid for that year.

The reference strike will be 100 basis points for Aug. 24, 2009, 80 bps for Aug. 24, 2010 and 60 bps for Aug. 24, 2011.

The payout at maturity will be par.

The notes will price in August and settle on Aug. 26.

Morgan Stanley & Co. Inc. will be the agent.

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