transform the city into a Marxist paradise<\/a>.\u00a0<\/p>\n\t\t\tMore From\t\t\t\t\t\t\tCharles Gasparino<\/p>\n
That is, unless they believe city debt will tank even more as major rating agencies \u2013 the firms that estimate the default risk of our bonds \u2013 begin slashing the city\u2019s bond ratings over fears that Mandani\u2019s spending will outrun city revenue projections.<\/p>\n
Consider the yield on the 10-year bond issued by the city\u2019s Transitional Finance Authority, one of the main issuers of city debt. It\u2019s rated at the highest level, AAA but is now trading at a whopping 3.89% for the week ending Sept. 4, up from 3.70% the week prior and way, way up from the yield of 2.9% at the end of January following the mayor\u2019s first month in office.\u00a0<\/p>\n
Rich Farley, a lawyer at Herbert Smith Freehills Kramer who specializes in debt financings, points out that the yield of NYC so-called TFA debt, issued by the Transitional Finance Authority, should be priced much lower than that of US Treasurys, just like comparable bonds that are similarly rated AAA.<\/p>\n
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. rmbarricarte \u2013 stock.adobe.com<\/p>\n
The city could be hit with bond ratings\u00a0\u201cdowngrade\u201d in the not-so-distant future. Christopher Sadowski<\/p>\n
\u201cThe fact that the yields are much higher, thus closer to the US Treasury yield (and prices are lower) \u201cindicates that the markets believe the risks are aligned with a downgrade,\u201d he says.<\/p>\n
\u201cFor triple-A rated bonds like the city\u2019s TFA the yield should be lower by 1% or 1.5%,\u201d Farley said of the spread between the 10-year Treasury and NYC\u2019s TFAs. \u201cBut being around 0.9% is signaling downgrade.\u201d<\/p>\n
A press official for New York City Comptroller \u2013 the Big Apple\u2019s chief fiscal officer \u2013 didn\u2019t return a call for comment. Mamdani spokesman Matthew Rauschenbach said: \u201cDespite volatility in the market, demand for the City\u2019s bonds remains strong, demonstrating continued investor confidence in our strong AA rating, which all four major credit rating agencies reaffirmed just last week\u201d<\/p>\n
\u201cThat strength is a reflection of the fiscal discipline of the Mamdani administration,\u201d he adds. \u201cSince taking office, we have taken aggressive action to achieve ongoing savings and efficiencies, putting our city on firm fiscal footing. And we are doing so while making critical investments in a more affordable city for all New Yorkers.\u201d<\/p>\n
Investors say based on the way NYC bonds are trading, Mamdani\u2019s socialism will slam the city\u2019s tax base, hurting the city\u2019s ability to repay its debts down the road MediaPunch \/ BACKGRID<\/p>\n
To be fair, none of the three major ratings \u2014 Moody\u2019s, S&P or Fitch \u2014 have told On The Money that a downgrade is imminent for NYC General Obligation or GO bonds \u2013 currently rated at the AA level by all three agencies. Ditto for TFA, rated at AAA by Fitch and S&P. These are the two types of bonds the city sells to repair roads and bridges and pay for Mamdani pipe dreams like rent freezes and free bus rides.\u00a0<\/p>\n
Moody\u2019s and Fitch, though, have city GOs on a negative outlook for a potential downgrade. Yes, the city\u2019s recent issuance of new GO debt weighed on the market for NYC-related paper.<\/p>\n
But that\u2019s not what I\u2019m hearing from investors; they say based on the way NYC bonds are trading, Mamdani\u2019s socialism will slam the city\u2019s tax base, hurting the city\u2019s ability to repay its debts down the road and lead to a downgrade. Buyers should nevertheless be bellying up given Mamdani\u2019s plans to continue to tax wealth creators and people who make more than $1 million, which would appear to be right the sweet spot of the municipal-bond investor base.<\/p>\n
\t\t\t\t\t\t\tCharlie Gasparino has his finger on the pulse of where business, politics and finance meet\t\t\t\t\t\t<\/p>\n
\n\t\t\t\t\t\t\tSign up to receive On The Money by Charlie Gasparino in your inbox every Thursday.\t\t\t\t\t\t<\/p>\n
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If history is any guide, the rating agencies are notoriously behind market trends (reps for Moody\u2019s and S&P had no comment about a downgrade and forwarded On The Money their ratings on a large NYC bond issue; Fitch didn\u2019t return a call for comment).\u00a0\u00a0<\/p>\n
NYC\u2019s debt service, meanwhile, stands at around 10% of its budget or above $8 billion in this fiscal year. It is projected to hit nearly $12 billion by 2030, according to the comptroller\u2019s office. A downgrade could spike those costs even more. And if more wealth creators continue to leave the city in response to Mamdani\u2019s Marxism, or if there\u2019s a Wall Street downturn, the budget numbers will continue to get worse.<\/p>\n
Meanwhile, the more Mamdani spends and redistributes, the more he will be spending to convince bond buyers to invest in city debt \u2013 until possibly there\u2019s no money left, whether the raters cut their assessments or not.<\/p>\n
\u201cI would be really hesitant to be buying long-dated NYC munis with the city run by this ideologue,\u201d said one high-net worth financial adviser who asked not to be named. \u201cThere are just better, less risky alternatives.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"New York City faces a possible hike in borrowing costs that could wreak havoc on its financial health…\n","protected":false},"author":2,"featured_media":343052,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[18800,288,57,9,24,56,63,65,64,11323,1211,3417,82],"class_list":["post-343051","post","type-post","status-publish","format-standard","has-post-thumbnail","category-new-york-city","tag-bonds","tag-business","tag-metro","tag-new-york","tag-new-york-city","tag-ny","tag-nyc","tag-nyc-headlines","tag-nyc-news","tag-on-the-money","tag-socialism","tag-wall-street","tag-zohran-mamdani"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/343051","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/comments?post=343051"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/343051\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media\/343052"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media?parent=343051"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/categories?post=343051"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/tags?post=343051"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}