Muni issuers put on notice that fate tied to U.S.
Scores of issuers in the U.S. municipal bond market, including cities, counties and school districts, were put on notice on Thursday by Moody's Investors Service that their top ratings could be cut if the United States' Aaa rating falls.
The 177 issuers, with $69 billion of outstanding debt, join five Aaa-rated states with a combined $24 billion of debt on review for possible downgrades as contagion from the U.S. debt crisis spreads deeper into munis.
All three major rating agencies have previously warned that municipal debt tied directly to the federal government and rated triple-A as a result faces the same potential for a downgrade as the United States. That debt includes pre-refunded muni bonds secured by federal securities and certain housing debt.
But the fear of downgrades has yet to find a footing in the muni market, where Maryland sold more than $500 million of bonds this week despite being targeted by Moody's for a possible cut in its Aaa rating.
Maryland's Montgomery County, which is also a triple-A-rated credit under review by Moody's, is still planning to sell nearly $580 million of general obligation bonds next week.
"The Maryland deal went pretty well this week," said Tim Firestine, the county's chief administrative officer. "I think we'll still be OK, but we'll monitor it day by day."
In municipal market trading on Thursday, munis continued to ignore the growing nervousness about the U.S. debt limit and prices on Municipal Market Data's benchmark triple-A scale ended little changed.
Yields on top-rated 10-year bonds finished up 1 basis point at 2.70 percent while 30-year yields were unchanged at 4.37 percent, according to MMD, a unit of Thomson Reuters.
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