Welcome to Thoughts on the Market.

I'm Michael Zezis, Head of Public Policy Research and Municipal Strategy for Morgan Stanley.

Along with my colleagues bringing you a variety of perspectives, I'll be talking about

the intersection between U.S. Public Policy and Financial Markets.

It's Wednesday, June 16th at 10.30 a.m. in New York.

This week, we turn our attention back to the discussions in Washington, D.C. on Infrastructure.

The upcoming week is setting up to be a consequential one.

That's because immediate reports saying the White House will determine which way

negotiations on infrastructure are to go.

The bipartisan route or the Democrats only route, and that matters quite a bit, particularly

if you're a fixed income investor.

Let's break it down.

The contours of the bipartisan infrastructure deal that appears to have a fighting chance

is one that spends about $700 billion and is fully funded through repurposed funds, gas

taxes, and other get to be determined pay for.

In short, it would be a plan without much impact to the deficit.

That could lend credibility to the idea that recent strong inflation data will only be

temporary by taking away the risk of a big pickup and net demand from government spending

will cause the prices of goods and services to continue rising at an above average pace.

An inflation as a temporary trend, rather than an enduring one, would be music to the

years of bond bulls, helping yields move lower in the short term.

But in our view, the bipartisan negotiations are more likely to break down than succeed.

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