Investors in NYCs municipal debt are starting to lose patience with Zohran Mamdani
Mayor Zohran Mamdani’s luck in the municipal bond market appears to be running out, On The Money has learned.After stabilizing or increasing a bit in the last couple of months, prices of New York City municipal bonds this month took a hit, with the “yield” – or return demanded by investors to compensate for various types of risk – spiking noticeably between July 3 and July 10, the latest available numbers show. The yield on a 10-year GO bond jumped to 3.34% from 3.28%, while the yield on a 10-year bond from what’s known as the “transitional finance authority” jumped 10 basis points – or hundredths of a percentage point, in bond-market speak – to 3.26%.Note that bond prices move in the opposite direction of yields.That’s because when people bail on any form of debt, you need a higher yield to attract new buyers. Both GOs and so-called TFA bonds are the main ways that the city finances billions of dollars of capital improvements, roads, bridges, various infrastructure needs.
They’re the lifeblood of the city’s economy.Given the city’s size, its various capital needs make it among the top issuers of municipal debt in the country.Its debt load is around $125 billion.
Roads keep needing repairs, so city officials need to keep finding buyers.The unusually high taxes here help with that since municipal bond returns are triple tax free for city residents. But other factors often come into play, such as the level of interest rates and, of course, if the city will be ultimately able to make good on its obligations.
On that last point, investors are starting to have their doubts with Mamdani in charge, Wall Street salesmen tell me.Thus, the markdowns we’re starting to see on what should normally be debt that attacks constant investor interest.What’s particularly striking about the prices and yields is the sudden change in direction.Despite Mamdani’s intentions to to turn the Big Apple into a socialist state, investors had been in a glas...