A Flash in the Pan(demic)? Migration Risks and Municipal Bonds

70 Pages Posted: 9 Feb 2022 Last revised: 24 Aug 2023

See all articles by Matthew Gustafson

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Peter H. Haslag

Vanderbilt University - Finance

Daniel Weagley

Georgia Institute of Technology - Scheller College of Business

Zihan Ye

University of Tennessee

Date Written: August 24, 2023

Abstract

We examine how the market is pricing risks to municipalities arising from the shift in location preferences induced by the pandemic. Areas experiencing negative migration shocks in the middle of 2020 exhibit higher municipal bond yield spreads through the end of 2021. This effect is concentrated at the 5-10 year horizon, is not explained by other local economic shocks, and is larger for bonds and in areas with more work-from-home exposure. Overall, our results suggest that investors have changed their estimates of the level or uncertainty of municipalities' future cash flows, especially for areas and bonds most exposed to the transition toward remote work.

Keywords: Municipal Bonds, COVID-19, Migration, Remote Work, Work From Home

JEL Classification: G12, J11, H70

Suggested Citation

Gustafson, Matthew and Haslag, Peter H. and Weagley, Daniel and Ye, Zihan, A Flash in the Pan(demic)? Migration Risks and Municipal Bonds (August 24, 2023). Georgia Tech Scheller College of Business Research Paper No. 4029984, Vanderbilt Owen Graduate School of Management Research Paper, Available at SSRN: https://ssrn.com/abstract=4029984 or http://dx.doi.org/10.2139/ssrn.4029984

Matthew Gustafson

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Peter H. Haslag (Contact Author)

Vanderbilt University - Finance ( email )

401 21st Avenue South
Nashville, TN 37203
United States

HOME PAGE: http://https://www.sites.google.com/site/peterhaslag/

Daniel Weagley

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
(404) 385-3015 (Phone)

HOME PAGE: http://www.danielweagley.com

Zihan Ye

University of Tennessee ( email )

Haslam Business Building
453, 1000 Volunteer Blvd,
Knoxville, TN TN 37916
United States

HOME PAGE: http://https://sites.google.com/view/zihanye/home

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