The investment bank warns in a report Wednesday that the sovereign debt crisis is far from over — and won’t end till deeply indebted rich country governments give holders of their bonds a good soaking.

The remarks amount to the latest warning issued to investors who have herded into government bonds this month, following a downturn in U.S. economic indicators and a series of anxious-sounding comments from Federal Reserve officials. The yield on the 10-year Treasury bond has plunged to a recent 2.45% from the already low level of 3% at the end of last month.

That rally surely has been driven in part by fear that the world is in for a long period of subpar growth. But it has been aided, the report contends, by the observation that holders of government bonds (and bonds issued by too big to fail banks) have received what amounts to preferential treatment during three years of crisis.

That can’t go on forever, analyst Arnaud Mares writes in the firm’s first Sovereign Subjects report.

“The question is not whether they will renege on their promises,” he writes of rich country governments, “but rather upon which of their promises they will renege, and what form this default will take.”

While Morgan Stanley said it doesn’t expect the biggest governments to stop making payments outright – currency issuers such as the United States and United Kingdom can, after all, simply print money if the need arises – it does believe buyers at current prices leave themselves scant defense against other tools policymakers might use to chip away at the their burdens, such as inflation, tax increases and regulatory restrictions.

“Outright sovereign default in large advanced economies remains an extremely unlikely outcome, in our view,” Manes writes. “But current yields and break-even inflation rates provide very little protection against the credible threat of financial oppression in any form it might take.”

Mares writes that while there has been much discussion of rising debt levels in rich country governments, even those scary-looking numbers understate the scale of the problem.

“Debt/GDP ratios are too backward-looking and considerably underestimate the fiscal challenge faced by advanced economies’ governments,” Mares writes.

The rating agencies have made similar points in recent weeks, contending that the biggest problem for policymakers is not the debt they have on the books now but the borrowing they will have to do in coming years to make good on promises coming due in the future.

Just to drive the point home, however, Mares likens the deteriorating fiscal situation in countries like the United States and Japan to the fix many bubble-era Sun Belt house buyers now find themselves in. To extend the analogy, bondholders are like the banks the lent to these poor saps when the housing bubble was whipped into a frothy peak.

“On the basis of current policies,” Mares writes, “most governments are deep in negative equity.”

The big question now, he continues, is what form this exciting new round of walking-away will take. For bondholders, he concludes, “History is not so reassuring after all.”