COVID-Induced Migration and Municipal Bonds

52 Pages Posted: 9 Feb 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: 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

Gustafson, Matthew and Haslag, Peter H. and Weagley, Daniel and Ye, Zihan, COVID-Induced Migration and Municipal Bonds (February 8, 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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