COVID-Induced Migration and Municipal Bonds
52 Pages Posted: 9 Feb 2022
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: February 8, 2022
Abstract
Migration patterns in the United States changed dramatically during the COVID-19 pandemic. We find that COVID-induced migration predicts municipal bond yield spreads, particularly for lower-rated bonds and areas experiencing larger than usual population outflows. Analyzing this effect across the term structure suggests both short- and long-run effects, with the short-run effect leading adversely hit areas to issue fewer bonds during the latter half of 2020. We find little evidence that pre-COVID trends in yield spreads relate to an area’s COVID-induced migration shock, and no evidence that abnormal migration predicts yield spreads prior to the COVID-19 pandemic. 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
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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