The latest worry about Mamdani as investors fret over NYCs financial health

New York City faces a possible hike in borrowing costs that could wreak havoc on its financial health as Mayor Zohran Mamdani continues to indulge in his socialist spending spree, On The Money has learned.It’s the consequence of tax revenue projections that don’t appear to cover growing expenditures in the years ahead.Taken together these two forces could, if the market pros are right, lead to what’s known as a bond ratings “downgrade” in the not-so-distant future.If you’re a regular reader of this column, you know that investors are already increasingly skittish, demanding a larger risk premium to buy city bonds in the form of higher yields and lower prices since Mamdani took over in January.More recently, some of the city’s debt travails could be attributed to unrest across the bond market as a whole.

Yields on benchmark Treasury bonds have been spiking on inflation jitters.(Rising prices tank the value of bonds because the “fixed income” in interest they draw stays the same in dollars.) Treasury debt has also been hit by rising US deficits and competition for investors with the AI buildout.But to a large degree, municipal bonds are – or at least, historically have been – their own kind of animal.

They typically move up and down for reasons of their own.They are triple-tax free and are repaid based on the “full-faith-and-credit” of the municipal issuer.Given the above, Big Apple residents looking to minimize their tax levies imposed by Mamdani should be flocking to NYC debt as the mayor promises to assess everything that moves in his bid to transform the city into a Marxist paradise. That is, unless they believe city debt will tank even more as major rating agencies – the firms that estimate the default risk of our bonds – begin slashing the city’s bond ratings over fears that Mandani’s spending will outrun city revenue projections.Consider the yield on the 10-year bond issued by the city’s Transitional Finance Authority, o...