Muni Market Prepares for Loss of AAA Ratings as S&P Downgrades U.S. Credit

[dkf]

By Michelle Kaske - Aug 7, 2011 7:40 AM GMT-

The $2.9 trillion municipal bond market is preparing for “hundreds and hundreds” of downgrades after Standard & Poor’s lowered the U.S. one level to AA+, the first-ever reduction for the country.

S&P is likely to cut its ratings on municipal debt secured by the federal government, such as pre-refunded bonds, tax- exempts backed by U.S. agencies, and credits that are most dependent on federal spending, Peter DeGroot, head of municipal research at JPMorgan Chase & Co. (JPM), wrote in an Aug. 5 report distributed after the federal downgrade. The New York-based ratings company said it would release a statement on state and local issuers today.

“There will be hundreds and hundreds of municipal downgrades, which will not do well to bolster investor confidence,” Matt Fabian, a managing director of Concord, Massachusetts-based Municipal Market Advisors, said in a telephone interview. “Treasuries may be able to shake off a real impact from the downgrade. Munis I’m less sure about.”

Municipal issuance has fallen amid the U.S. debt-ceiling impasse. The slump and signs of a slowing economy helped drive tax-exempt yields to the lowest this year. Scheduled debt sales total about $2.8 billion this week, the slowest August week since 2003, according to data compiled by Bloomberg.


http://www.bloomberg.com/news/2011-08-07/muni-market-prepares-for-loss-of-aaa-ratings-as-s-p-downgrades-u-s-credit.html

[rsmith6621]

1. Many Projects in the Seattle Area are Endanger of Being Put On Hold....

........for years.....result??? they will cost more $$$$$ to complete later.

[madrchsod]

2. perfect example of the shock doctrine....

have a criminal enterprise destroy a nation`s economy. got to hand to s&p...the whole world is falling for your crimes.

[dixiegrrrrl]

3. and more jobs gone.