Morgan Stanley's bottom line will be hurt by the recent rebound in its bond prices, the Wall Street Journal said.

On account of the accounting treatment on some bonds issued by Morgan Stanley before the financial crisis erupted, the company is expected to take a hit of $1.2 billion to $1.7 billion on the bonds when it reports its first quarter results later this month, the paper said, citing people familiar with the situation.

The bonds, valued at about $29 billion recently, rallied as Morgan Stanley distanced itself from fears last fall that it was in dire straits, the paper said, adding that the gains forced the firm to increase the paper value of bonds it owes to investors.

Reuters efforts to contact Morgan Stanley out of regular office hours were unsuccessful, while a spokeswoman from the company's office in Hong Kong was not immediately available to comment.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Tomasz Janowski)