On Wall Street, De Blasio Is Getting Respect

NEW YORK (Bloomberg) -

Mayor Bill de Blasio has taken heat from the press for rising homelessness, tensions with the police and his attention to fringe issues like restricting horse carriages in Central Park. He’s also winning respect from an unexpected corner: Wall Street.

De Blasio, who took office two years ago vowing to combat the growing gap between the rich and the poor, last month proposed an $82.1 billion budget for the July 1 fiscal year that keeps $5 billion in reserves. The city, benefiting from an economy that boosted sales and income tax collections 15 percent since fiscal 2014, on Tuesday is selling $1 billion of bonds backed by that revenue to pay for capital projects.

“Some of the rhetoric that was going around when the mayor was elected really didn’t describe the mayor we’re seeing,” said Charles Grande, head of municipal research for UBS Global Asset Management, which holds New York bonds among its $15 billion of state and local debt. “It really is refreshing to see this type of restraint in the face of the revenue surplus.”

That approach has reassured investors, who initially pushed up yields on New York City bonds amid speculation that de Blasio’s policies could jeopardize the government’s fiscal stability. The city’s 10-year debt yields 2 percent, or 0.33 percentage point more than top-rated securities. That gap has narrowed from as much as 0.6 percentage point more in late January 2014, weeks after de Blasio took office.

When the Democrat took office, contracts with all 152 municipal unions had expired, casting uncertainty over the budget. He has since settled with almost all of the city’s more than 300,000 employees, with $3.4 billion in anticipated health-care savings.

New York’s general-obligation bonds carry the third-highest rating from Standard & Poor’s, Fitch Ratings and Moody’s Investors Service. The income and sales-tax bonds that are being sold Tuesday are rated AAA by S&P and Fitch and Aa1, the second- highest grade, by Moody’s.

The real test for de Blasio will come when he’s faced with an economic downturn, said Ted Molin, senior credit analyst at Wilmington Trust Co., a unit of M&T Bank Corp. that oversees $4 billion of municipal bonds.

Molin said he’s pleased the de Blasio administration has continued the stringent budgeting and financial controls of prior administrations.

“One of the great strengths that New York City has had has been very, very strong professional financial management,” Molin said.