Morgan Stanley Issues $1.97 Billion in Fixed Rate Notes Due 2033 at 4.8% Annual Interest

Debt Issuance Structure and Key Terms

Morgan Stanley completed the pricing of this fixed rate debt offering on July 16, 2026, with settlement scheduled for July 20, 2026. The total aggregate principal amount issued was $1,969,000,000, with each note carrying a stated principal amount of $1,000 and an initial issue price equal to par value. The notes are fixed rate securities maturing on July 20, 2033, providing a seven-year investment horizon for purchasers at the time of issuance.

The coupon structure provides for a fixed annual interest rate of 4.8% per annum, paid semi-annually in arrears on January 20 and July 20 of each year, beginning with the first interest payment on January 20, 2027. The day-count convention applied to interest calculations is the 30/360 (Bond Basis) standard. At maturity, investors receive the stated principal amount of $1,000 per note plus any accrued and unpaid interest. The notes are issued in book-entry form and are not listed on any securities exchange, with The Bank of New York Mellon serving as trustee and Morgan Stanley Capital Services LLC as calculation agent.

Pricing, Valuation, and Cost Structure

The notes were offered at an issue price of $1,000 per note to the general public, though investors purchasing through fee-based advisory accounts received a price of $992.50 per note. Morgan Stanley & Co. LLC, the wholly owned subsidiary serving as agent, received fixed commissions of $7.50 per note from dealers, except in fee-based advisory account transactions. The total proceeds to Morgan Stanley from this issuance, after commissions and fees totaling $14,767.50, amounted to $1,954,232.50.

The pricing supplement discloses that the estimated value of each note on the pricing date of July 16, 2026, was $969.90, representing a discount of approximately $30.10 from the $1,000 issue price. This valuation discount reflects the costs associated with issuing, selling, structuring, and hedging the notes, which are borne by investors as part of the initial purchase price. Morgan Stanley's disclosure states that these embedded costs reduce the economic value of the securities at issuance, and the company's internal funding rate used to determine the economic terms is likely to be lower than its secondary market credit spreads, thereby providing a structural advantage to the issuer.

Valuation Models and Secondary Market Pricing

Morgan Stanley disclosed that the estimated value of the notes on the pricing date was determined using the company's own pricing and valuation models, incorporating market inputs and assumptions relating to volatility and other factors, including current and expected interest rates as well as the issuer's secondary market credit spread. The company defined secondary market credit spread as the implied interest rate at which its conventional fixed rate debt trades in the secondary market. This valuation methodology reflects the dual nature of the securities, comprising both a debt component and a performance-based component linked to interest rate movements.

The pricing supplement explicitly warns that the secondary market price of the notes may differ materially from the estimated value on the pricing date. Morgan Stanley & Co. may purchase notes in the secondary market at prices lower than the estimated value, taking into account the issuer's secondary market credit spread, the bid-offer spread that the agent would charge, the costs of unwinding related hedging transactions, and other market factors. The disclosure further states that Morgan Stanley & Co. may choose to make a market in the notes but is under no obligation to do so and may cease market-making activities at any time. This liquidity risk is a material consideration for investors contemplating early exit from the investment.

Credit Risk and Default Exposure

The notes are unsecured direct obligations of Morgan Stanley and carry no security interest in any underlying assets. All payments of principal and interest are subject to the full credit risk of Morgan Stanley. The pricing supplement prominently discloses that if Morgan Stanley defaults on its obligations under the notes, investors could lose some or all of their investment. The securities are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of or guaranteed by any bank entity.

The company disclosed that investors' returns are entirely dependent on Morgan Stanley's ability to pay all amounts due on the scheduled interest payment dates and at maturity. Any actual or anticipated decline in Morgan Stanley's credit ratings or increase in credit spreads charged by the market could adversely affect the market value of the notes prior to maturity. The market value of the notes will be affected by changes in the market's perception of Morgan Stanley's creditworthiness, independent of changes in broader interest rate environments or other macroeconomic factors.

Interest Rate and Market Price Sensitivity

The pricing supplement identifies multiple factors that may cause the secondary market price of the notes to be substantially less than the original purchase price. These factors include actual or anticipated changes in interest and yield rates, changes in Morgan Stanley's credit ratings or credit spreads, and the time remaining to maturity. The disclosure indicates that the longer the time remaining to maturity and the more tailored the exposure, the greater the impact of these pricing factors on market values. This sensitivity creates significant potential for adverse price movements in response to macroeconomic shifts or issuer-specific credit developments.

Assuming no change in market conditions or other relevant factors, Morgan Stanley disclosed that the secondary market prices at which dealers, including the underwriting agent, would be willing to purchase the notes are likely to be significantly lower than the estimated value on the pricing date. The company's disclosure does not provide specific quantification of this expected secondary market discount but characterizes it as substantial. This structural feature means that investors seeking liquidity before maturity may face considerable mark-to-market losses, particularly in rising interest rate environments or in response to widening credit spreads for Morgan Stanley debt instruments.

Registration and Regulatory Framework

The notes were offered pursuant to Morgan Stanley's effective registration statement on Form S-3 (Registration Statement No. 333-293641). The pricing supplement was filed with the Securities and Exchange Commission pursuant to Rule 424(b)(2) on July 17, 2026, one business day after the pricing date of July 16, 2026. The offering was conducted in accordance with the terms set forth in the accompanying prospectus supplement dated April 8, 2026, and the base prospectus dated April 8, 2026, each of which contains additional disclosures regarding the offering and the notes.

The SEC regulatory framework under which these securities were offered requires that investors be provided with comprehensive disclosure of material risks and economic terms. Morgan Stanley's disclosure notes that the SEC and state securities regulators have not approved or disapproved these securities or determined whether the pricing supplement, prospectus supplement, or base prospectus is truthful or complete. The notes are governed by the Trust Indenture Act of 1939 and the Securities Act of 1933, as amended, with detailed terms and conditions incorporated by reference in the prospectus and prospectus supplement documents.

Distribution, Commissions, and Conflict of Interest Disclosures

Morgan Stanley & Co. LLC, a wholly owned subsidiary of Morgan Stanley, serves as the underwriting agent for this distribution. The agent compensation structure includes fixed sales commissions of $7.50 per note paid to selected dealers and their financial advisors, except in the case of dealers selling to investors in fee-based advisory accounts, who receive no commission on such transactions. Morgan Stanley Wealth Management, an affiliate of the agent, is identified as participating in this commission-sharing arrangement, creating a potential conflict of interest insofar as the underwriting agent's affiliate may benefit from directing client purchases to certain transaction structures.

The pricing supplement directs investors to the "Supplemental Information Concerning Plan of Distribution; Conflicts of Interest" section for additional detail on the compensation arrangements and potential conflicts arising from Morgan Stanley's multiple roles as issuer, underwriter, and affiliate distributor. The company's disclosure acknowledges these structural conflicts but does not quantify or enumerate specific mitigation measures beyond the stated fee arrangements. Investors are advised to consult the full prospectus documents for a complete description of the distribution arrangements and potential conflicts.

Use of Proceeds and Internal Funding Economics

The pricing supplement states that information regarding the use of proceeds and hedging activities is provided on page 5 of the document, though the specific text of that section was not included in the filed disclosure provided. The company disclosed that in determining the economic terms of the notes, including the fixed coupon rate of 4.8%, Morgan Stanley uses an internal funding rate that is likely to be lower than the company's secondary market credit spreads. This internal rate advantage to the issuer means that if issuance, selling, structuring, and hedging costs borne by investors were lower, or if the internal funding rate were higher, the economic terms would be more favorable to note holders.

The pricing supplement discloses that the $1,954,232.50 in net proceeds to Morgan Stanley (after agent commissions of $14,767.50) represents the funds available for the company's general corporate purposes, as supplemented by disclosures in the related prospectus documents. The structural advantage provided by the internal funding rate and the embedded costs of issuance represent economic transfers from note purchasers to Morgan Stanley, reflected in both the initial discount to par value and the ongoing fixed coupon rate that may be lower than the issuer's secondary market borrowing costs at issuance.

CUSIP, ISIN, and Identification Standards

The notes have been assigned a CUSIP (Committee on Uniform Securities Identification Procedures) number of 61760QXM1 and an ISIN (International Securities Identification Number) of US61760QXM13. These identifiers enable tracking and settlement of the notes through standard clearing and depository systems. The notes are issued in book-entry form only, with no certificated form available, streamlining settlement procedures and reducing administrative costs for both the issuer and investors using institutional custody and settlement infrastructure.

The notes are denominated in U.S. dollars exclusively, with all interest and principal payments made in the specified currency. The business day convention for interest payment purposes is defined by reference to the New York calendar, meaning that if any scheduled interest payment date falls on a date that is not a business day in New York, the payment will be made on the next succeeding business day without adjustment to the interest amount itself. This convention protects the issuer from having to make additional interest accruals for delayed payment dates.