Airport bond yields have nearly returned to pre-pandemic levels as U.S. citizens continue to get vaccinated and travel volumes rise.
Bonds backed by America’s airports are rallying back as the Covid vaccine rollout promises to revive the travel industry, marking a rebound for one of the corners of the municipal-debt market hardest hit by the pandemic.
The rally has driven the yields on debt backed by airports down to about 1.2%, or about 30 basis points more than the market’s benchmark, according to an ICE Bank of America index tracking the sector. That marks a dramatic shift from early in the pandemic, when speculation about the deep financial toll of the nation’s shutdowns drove the index’s yield to more than 4% as investors dumped the securities in droves.
The move eliminates what had been some of the rare bargains in the municipal securities market as valuations on top-rated bonds hover near record highs. Junk bonds have climbed, too, pushing the yields back toward the more than two-decade low hit before Covid-19 raced through the U.S.
“During the pandemic, airlines and anything associated got absolutely crushed in terms of spread — and they stayed wider for a longer period of time than some of the other sectors that were affected,” said Jason Appleson, a portfolio manager at PT Asset Management in Chicago. “In terms of buying opportunity, I’m not sure there is a lot left.”