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

72 Pages Posted: 9 Feb 2022 Last revised: 7 Nov 2022

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 Nevada, Las Vegas

Date Written: November 5, 2022

Abstract

Population changes become a more significant predictor of municipal bond yield spreads during the COVID-19 pandemic. Areas experiencing positive (negative) migration shocks in the middle of 2020 exhibit lower (higher) municipal bond yield spreads both immediately and through the end of 2021. This effect is larger for lower-rated and medium-term bonds, and is not explained by other local economic shocks. Further evidence highlights the importance of remote work in pandemic-era migration patterns. Our findings suggest that market participants believe that COVID-period migration captures a permanent, economically relevant, phenomenon that poses downside risk to the future of some municipal economies.

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

JEL Classification: G10, 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 (November 5, 2022). Georgia Tech Scheller College of Business Research Paper No. 4029984, 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 Nevada, Las Vegas ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

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