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

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: 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