New York City is in pretty great shape financially. Recent drops in the price of its bonds aren’t because of worries about Mayor Mamdani’s socialist fiscal policies. Instead, it’s because of some stuff happening in DC that’s rattling the entire bond market.
That, at least, is the far-fetched spin coming from New York City Comptroller Mark Levine, the city’s independently elected chief fiscal officer. He was responding to questions I had last week about the recent uptick in so-called yields — interest rates on the Big Apple’s municipal debt.
For bond-market novices, yields and prices go in opposite directions even as they signal the same thing: the value of lending money to the city. Yields spike when prices decline because investors demand more compensation for taking the risk of holding a bond until maturity when the loan is repaid (typically in 10 years).
That’s exactly what has been happening as Mamdani doubles down on his Marxist Third-Worldism, every minute of every day, it seems. Yields on the 10-year municipal bond spiked for the week ending July 17, to 3.46% from 3.34%, after a jump the week before.
These weren’t isolated examples. Look at a chart of city bond prices since Mamdani took office and, in addition to precipitous drop between January and this month, you see a premium being demanded by investors in the form of higher yields. That trend mellowed out for a time, after he “balanced” his first budget (with various gimmicks, of course), but more recently prices have resumed their descent.
Yes, Levine correctly points out that many factors cause city bond prices to seesaw. Bonds in general have been falling across the board because of the high price of oil and inflation fears rooted in policies coming out of Washington.
“The recent movement in the city’s bond yields does not indicate an eroding tax base, which is at record levels, or the expectation of a rating downgrade,” comptroller rep Shaquana DeVissiere tells me.
“Over the same period, the 10-year municipal benchmark rose a comparable amount, suggesting that the change reflects broader market conditions.”
DeVissiere also claims “the city’s credit remains strong.”
Triple tax-free
I’ll come back to these statements in a moment, but recall that muni bonds have unique characteristics in that they are triple tax-free. You don’t pay federal, state or local taxes if you’re a city resident and hold them. That makes NYC munis a great tax shelter when you have a mayor who wants to soak the rich — as Mamdani is doing now.
In other words, prices should be more stable, Wall Street financial advisers tell me — unless, of course, you worry that the guy in charge wants to blow the place up.
Mamdani is not merely content to spend record amounts of money (see his $125.8 billion budget) on boondoggles like government-run grocery stores. He also wants to milk already overtaxed wealth creators more — even as they continue to flee to Florida.
Our credit “remains strong” for now, Mr. Comptroller, but the tax base is “eroding” as every statistic shows people who can afford to leave are, in fact, leaving in droves. Meanwhile, people who monitor our “credit” at the Wall Street rating agencies are in fact warning it’s not so strong.
Mamdani also has an odd way of governing a diverse city that’s home to the largest Jewish population outside of Israel. On top of his refusal to oppose “globalizing the intifada,” he wants Israeli Prime Minister Benjamin Netanyahu arrested for war crimes. When the mayor learns that can’t be done, he calls for protests if and when the PM visits the city.
Then he seems surprised that antisemitic hate crimes are up, including a couple of apparently hate-inspired stabbings on the Upper West Side just after he calls for protests.
Not exactly reassuring for bond investors. I say this as someone who has covered this market for decades. It’s not just bond ratings and budgets that move muni-bond prices; confidence in the mayor, or lack thereof, matters as well.
I remember when David Dinkins was elected mayor and the city’s bonds began to fall. Like our current mayor, Dinkins came to office with a pretty weak résumé (city clerk, Manhattan borough president), which in hindsight looks positively Churchillian compared to Mamdani’s (an assemblyman and rapper).
Still, as Dinkins started governing in 1990, bond prices started to fall, pretty dramatically for a while until he got his act together. It wasn’t just because of falling tax revenues and Wall Street cutbacks following the 1987 market crash, and of course his own progressive spending plans.
The real problem was when it was revealed that, amid the worst budget crisis since the 1970s, Dinkins did something foolish and spent $11,500 — much of that from public funds — on a fancy headboard in his Gracie Mansion bedroom.
Yes, muni-bond prices did fall on that news. That’s why it’s also a good bet that munis are now falling partly because we have a mayor who seems less interested in arresting their decline than in arresting the Israeli prime minister.