Welcome to the thoughts on the market. I'm Michael Zezes, head of Public Policy Research and Municipal Strategy for Morgan Stanley.

Along with my colleagues bring you a variety of perspectives, I'll be talking about the intersection between U.S. public

policy and financial markets. It's Wednesday, April 1st at 11 a.m. Eastern.

There's not many headlines that can shock New Yorkers these days, but one that may have is a statement from the MTA,

which runs the city subway system.

They say they need federal aid to avoid defaulting on its bonds.

With ridership down 90% as people follow social distancing guidelines, the MTA estimates it's losing about

$125 million a week.

It reminds us that investors need to look to the $2 trillion stimulus bill, which became

law last Friday, for cues about the fundamental health of the

muni bond market. The bill includes around 400 billion dollars for municipal

governments and non-profits. And this makes sense because this group has in many ways

been at the forefront of responding to COVID-19

and draining their financial resources to do so.

But it's $400 billion enough to preserve their financial health.

It's a key question for municipal bond investors investors and the answer varies depending on the sector.

The money is least likely to be sufficient in the state and local government sector.

$150 billion of direct aid sounds like a lot,

but after you break down how it's distributed,

many states are only getting between 2 and 5% of their normal revenues.

With an economy expected to shrink 30% this quarter, that's likely not a big enough

amount of aid to avoid states having to over time, cut

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