Muni Market Agrees With De Blasio: New York City Is Coming Back

Mayor Bill de Blasio is promising this will be The Summer of New York City. Muni-bond investors tend to agree.

With about $14 billion of federal aid, virus cases falling by 50% in the past two weeks, hotel occupancy rates increasing, subway ridership up, and the mayor’s pledge to fully reopen by July 1, the city is set for a comeback from a year ago when it was the epicenter of the pandemic in the U.S.

“This certainly makes people feel even better about the city and more optimistic,” Gary Pollack, head of fixed income for private wealth management at Deutsche Bank, said about de Blasio’s plan to fully open up businesses and most cultural attractions by July 1.

While the three major credit rating companies currently give New York City a negative outlook, meaning it’s at risk of more downgrades, bond buyers are staying with the city.

The gap between the yields on New York City’s 10-year bonds has dropped to just 23 basis points over the market’s benchmark, the narrowest gap since March 2020 and down from as high as 0.74 basis points in May 2020, according to data compiled by Bloomberg.

“That’s a positive sign that the market as a whole sees value in New York City’s credit,” said Neil Klein, co-director of fixed income strategy at Carret Asset Management. “And we agree. We own New York City bonds and we don’t feel compelled to be a seller.”

Muni Market Agrees With De Blasio: New York City Is Coming Back

The city has slowly reopened bars, restaurants, museums and sporting venues. De Blasio is betting that tourism will continue to pick up as more businesses and cultural institutions expand their capacities. Governor Andrew Cuomo, who has ultimate reopening authority, said Thursday he’s hoping the city can fully reopen before de Blasio’s July 1 date, but isn’t making any promises.

“This is going to be the summer of New York City,” de Blasio said Thursday during a press briefing. “We’re all going to get to enjoy this city again, and people are going to flock here from all over the country to be a part of this amazing moment.”

Still, Pollack is sticking mostly with New York City’s shorter-term securities because there are risks to the city’s commercial real estate market as people may continue to work remotely even post-pandemic.

“What happens a couple of years from now, when all the dust settles and we really go back to a pre-pandemic environment?” Pollack said. “Will people still be congregating in large urban centers like they did before?”

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