A Flash in the Pan(demic)? Migration Risks and Municipal Bonds
Georgia Tech Scheller College of Business Research Paper No. 4029984
Vanderbilt Owen Graduate School of Management Research Paper
70 Pages Posted: 9 Feb 2022 Last revised: 24 Aug 2023
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: Suggested Citation
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
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