Welcome to Thoughts on the Market.

I'm Michael Zezas, 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 Tuesday, March 17th at 1130 a.m. Eastern.

When markets get this volatile, strange things start to happen in markets you might not expect.

That's both a sign of stress and in some cases a sign of opportunity.

Today's municipal bond market is a great example of this

and we want to break down where the opportunities are.

The meaning market has undergone a great deal of stress. and we want to break down where the opportunities are.

The meaning market has undergone a great deal of stress.

Its underperformance was worse, both in speed and size

than the financial crisis.

In two weeks, the market went from pricing rich

by most measures to historically cheap.

Why did that happen?

Are municipalities particularly exposed to the stresses of the coronavirus?

Some types of issuers are, like hospitals in particular, which we recently reduced our weighting to, and high-yield munis should

see strain because of a weaker economy.

But for most issuers, this move was about a muni liquidity trap.

Munis are a market where the ownership isn't particularly diverse. It's owned mostly by individual investors.

And when they wanted cash all at once, as virus fears hit the risk markets, the sell off was sharp and severe.

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