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Research Spotlight: The Impact of COVID-19 Migration Patterns on Municipal Bonds

Sep 22, 2022
New Vanderbilt research explores the economic effects of pandemic-related migration patterns on municipal bonds

By Lacie Blankenship

The COVID-19 (COVID) pandemic is labeled as a global health crisis, but its impact reaches far beyond health. The term ‘unprecedented’ has become part of a common vocabulary used to describe unemployment rates, supply chain fluctuations, prices, technological demands, and the average day-to-day. 

Municipal Bonds, Peter Haslag

Peter Haslag

Challenged with these unprecedented times and due widely to the increase in remote/hybrid work and life, municipalities have experienced significant shifts in their economies, with new migration patterns and varying goods/services needs. 

A Flash in the Pan(edemic)? Migration Risks and Municipal Bonds, by Peter Haslag, Assistant Professor of Finance, finds that the disruption to migration patterns due to the pandemic has a natural and significant impact on the fiscal health of municipalities. Using data on municipal bonds, this study explores how the pandemic-motivated change in migration patterns and lifestyles impacts the vitality of municipalities.

The Takeaway

The study finds that in light of the pandemic, the disruption to migration patterns and changes in preferences for goods/services significantly impacts the vitality of municipalities and is likely a lasting and economically relevant phenomenon. 

The ultimate takeaway is that the change in preferences that are revealed through migration patterns is likely to be a permanent and economically meaningful event,” the authors write. 

The bond market confirms that areas suffering from abnormal population outflows will see the largest yield changes in 5 to 10 years, suggesting more risk in the medium-run. 

The Implications 

“The forward-looking nature of municipal bond prices allows us to better understand to what extent the pandemic-induced shift in location and lifestyle preferences will have a lasting impact on local economies,” says Haslag. 

In areas experiencing greater outflows, bond yields increased, suggesting  greater risk for these counties going forward. Likewise, in areas where people migrated to, bond yields were relatively lower, a sign of lesser risk. 

The findings from this study add to the conversation of whether or not the pandemic’s economic effects are likely to persist. “The anticipated permanence of these shifts in location preferences and the underlying risk factors for local economies and municipal finances are important considerations for policymakers, investors, employers and employees moving forward,” the authors write. 

The Details

The study, A Flash in the Pan(edemic)? Migration Risks and Municipal Bonds, co-authored by Haslag, Matthew Gustafson, Daniel Weagley, and Zihan Ye, is under review. Click here to read the current version of the study.

Another related study by Haslag, From L.A. to Boise: How Migration Has Changed During the COVID-19 Pandemic, explores human migration changes during the COVID-19 pandemic and can be viewed here.

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