Mamdanis tax-and-spend plans leave NYC bond investors leery

At the start of his term in January, Mayor Mamdani had the Big Apple’s lenders in his corner — despite his plans to remake the Big Apple economy under his socialist agenda.Now that appears to be changing fast, as municipal bond investors have begun to sell New York City debt, with prices falling and interest rates — the so-called yields — spiking to their highest levels in months.To be sure, lots of factors are at play here, not least the Iran war that’s hitting bonds across the board.But there’s also an unmistakable worry about Mamdani’s plans to unleash spending and raise taxes, which could spur yet more jobs and taxpayers to flee Gotham and the Empire State.Investors in NYC bonds aren’t likely to be big supporters of socialism, of course.

Theirs is a financial incentive: If you live in NYC and are among those who hold the roughly $100 billion (and growing) in city debt, your returns are triple tax-free.That means NYC munis are a good place to shelter income — not just from rapacious tax men at the federal and state level, but also from Mamdani.Right now, the mayor is scrambling to make sure he has a balanced budget — as he is required to have by law — while handing out all the free stuff he promised when he convinced 50.78% of voters to select him in November.For most of the first weeks of his term, Mamdani had the municipal bond market in his corner; the more he spent, the more it seemed that muni bond investors — the vast majority of them high earners — would plow their money into NYC General Obligation (GO) debt and something called Transitional Finance Authority debt to reap some tax-free income.Until now, that is.

Late this past week, Moody’s Ratings said it could soon downgrade the city’s bond rating from its current, modestly strong AA level.Since the end of February, GO yields have spiked 17% (prices fall when yields rise) while transitional bond yields have risen 16% over that time.How low will the bond ratings go is uncl...