Morgan Stanley Issues Fixed Rate Notes Due 2032 With 4.9% Annual Interest Rate

Fixed Rate Note Structure and Payment Terms

Morgan Stanley's Fixed Rate Notes are debt securities with a stated principal amount of $1,000 per note and an issue price of $1,000. The notes carry a fixed interest rate of 4.9% per annum, payable semi-annually on the 30th calendar day of January and July, beginning with the initial interest payment date of January 30, 2027. The company did not disclose the aggregate principal amount offered in this preliminary pricing supplement, as that figure was to be determined at pricing. The notes will mature on July 30, 2032, at which time investors will receive the stated principal amount plus any accrued and unpaid interest.

Interest on the notes is calculated using the 30/360 day-count convention on a bond basis, which is standard for many corporate debt instruments. If any scheduled interest payment date falls on a day that is not a business day in New York, the payment will be made on the next succeeding business day without any adjustment to the interest amount. The notes will be issued in book-entry form, eliminating the need for physical certificates, and will not be listed on any securities exchange.

Pricing and Valuation of the Securities

The estimated value of each note on the pricing date is approximately $983.70, or within $53.70 of that estimate. This valuation reflects the difference between the $1,000 issue price and the company's assessment of the note's intrinsic value. The discount of approximately $16.30 per note includes costs associated with issuing, selling, structuring, and hedging the notes, which are borne by investors purchasing these securities. Morgan Stanley's pricing supplement indicates that the estimated value incorporates both a debt component and a performance-based component linked to interest rates.

In determining the estimated value on the pricing date, Morgan Stanley uses its own pricing and valuation models, market inputs, and assumptions relating to volatility and other factors including current and expected interest rates, as well as the company's secondary market credit spread. The secondary market price at which the agent, Morgan Stanley & Co. LLC, may purchase notes in the secondary market could vary from the estimated pricing date value due to changes in market conditions, interest rates, credit spreads, bid-offer spreads, hedging costs, and other factors. The filing discloses that the economic terms of the notes, including the 4.9% interest rate, are determined using Morgan Stanley's internal funding rate, which the company notes is likely to be lower than its secondary market credit spreads and therefore advantageous to the issuer.

Credit Risk and Default Considerations

All payments on the Fixed Rate Notes are explicitly subject to the credit risk of Morgan Stanley. The preliminary pricing supplement states prominently that if Morgan Stanley defaults on its obligations, investors could lose some or all of their investment. The notes are not secured obligations, meaning investors will not have any security interest in or access to any underlying reference assets or collateral. These securities are not guaranteed by any other entity, and investors' recovery depends entirely on Morgan Stanley's ability and willingness to meet its payment obligations.

The filing emphasizes that investors are dependent on Morgan Stanley's creditworthiness and that any actual or anticipated changes to the company's credit ratings or credit spreads may adversely affect the market value of the notes prior to maturity. The market value of the notes is likely to decline if market participants view Morgan Stanley's creditworthiness as deteriorating. Additionally, the notes are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality.

Market Value Volatility and Secondary Market Risk

The price at which the notes may be sold prior to maturity will depend on multiple factors and may be substantially less than the amount for which they were originally purchased. Key factors affecting market value 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 filing indicates that the longer the time remaining to maturity and the more tailored the exposure, the greater the likelihood that market prices will be affected by these factors.

According to the disclosure, depending on the actual or anticipated level of interest and yield rates, the market value of the notes is expected to decrease, and investors may receive substantially less than 100% of the issue price if they attempt to sell the notes prior to maturity. Morgan Stanley & Co. LLC may, but is not obligated to, make a market in the notes in secondary trading. If the agent chooses to make a market in the notes, it may cease doing so at any time, which could limit investors' ability to sell the notes and potentially reduce liquidity for secondary market transactions.

Issuance Administration and Regulatory Framework

The Fixed Rate Notes are issued under Morgan Stanley's shelf registration statement number 333-293641, with the preliminary pricing supplement filed pursuant to Rule 424(b)(2) on July 17, 2026. The Bank of New York Mellon serves as the trustee for the notes, while Morgan Stanley Bank, N.A. acts as the calculation agent responsible for computing interest payments and other note-related calculations. Morgan Stanley & Co. LLC, a wholly owned subsidiary of Morgan Stanley, serves as the agent for the offering.

The notes have been assigned a CUSIP number of 61760QXS8 and an ISIN of US61760QXS82, facilitating their identification in clearing and settlement systems. The preliminary pricing supplement was dated July 17, 2026, with the original issue date scheduled for July 31, 2026, representing approximately five business days after the pricing date. The accompanying prospectus and prospectus supplement, both dated April 8, 2026, provide additional details regarding the notes and the company's debt securities program.

Distribution and Commission Structure

The preliminary pricing supplement indicates that selected dealers, including Morgan Stanley Wealth Management (an affiliate of the agent), and their financial advisors will collectively receive a fixed sales commission from Morgan Stanley & Co. for each note sold. The commission amount was not specified in the preliminary pricing supplement, as those figures are typically determined at final pricing. However, dealers selling notes to investors purchasing securities in fee-based advisory accounts will not receive a sales commission with respect to such notes, reflecting different compensation arrangements for advisory-based distribution channels.

The filing states that the price to public for investors purchasing the notes in fee-based advisory accounts will differ from the standard public price, though the specific price was not disclosed in the preliminary supplement. The proceeds to the issuer from the offering were also not detailed in this preliminary document, as they depend on the final pricing and aggregate principal amount to be determined at the completion of the offering process.

Economic Terms and Issuer Advantages

Morgan Stanley discloses in the pricing supplement that the rate it is willing to pay for securities of this type, maturity, and issuance size is likely to be lower than the rate implied by its secondary market credit spreads, which represents an economic advantage to the issuer. The company acknowledges that if the costs associated with issuing, selling, structuring, and hedging the notes borne by investors were lower, or if the company's internal funding rate were higher, the economic terms of the securities would be more favorable to purchasers.

The preliminary pricing supplement emphasizes that the inclusion of costs associated with issuing, selling, structuring, and hedging the notes in the original issue price reduces the economic terms available to investors. This represents important transparency regarding how issuance costs affect the notes' value proposition relative to conventional fixed-rate debt with similar maturity and issuer characteristics. The disclosure reflects regulatory requirements for complex securities to provide investors with clarity regarding how various economic factors influence the terms being offered.

Use of Proceeds and Hedging Activities

The preliminary pricing supplement references a section titled "Use of Proceeds and Hedging" on page 5 of the document but does not detail the specific use of proceeds or hedging strategies in the filed excerpt. The filing indicates that the company will engage in hedging activities related to these notes, and the costs of such hedging are reflected in the estimated value calculation and the difference between the issue price and estimated pricing date value. The hedging activities are expected to help Morgan Stanley manage its exposure related to the fixed rate obligations represented by these notes.

Investors are informed that the secondary market price at which Morgan Stanley & Co. purchases notes may reflect the costs of unwinding related hedging transactions, along with other factors affecting secondary market pricing. This disclosure acknowledges that hedging costs represent a real economic component of these securities and may affect the price at which investors can subsequently sell their holdings in the secondary market.

Regulatory Status and Investor Considerations

The preliminary pricing supplement includes a standard disclaimer that the Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, nor have they determined whether the preliminary pricing supplement or the accompanying prospectus supplement and prospectus are truthful or complete. The filing also includes the SEC's standard warning that any representation to the contrary would constitute a criminal offense. Investors are directed to read the preliminary pricing supplement in conjunction with the related prospectus supplement and prospectus, which can be accessed via hyperlinks provided in the document.

The filing emphasizes that the notes involve risks not associated with an investment in ordinary fixed-rate debt securities and directs investors to consult their financial and legal advisers regarding the risks and suitability of these securities for their particular circumstances. The comprehensive risk factor section in the accompanying prospectus supplement and prospectus provides detailed information regarding credit risk, valuation uncertainty, market volatility, and other considerations relevant to potential investors in these Fixed Rate Notes.