Municipal bond-rating downgrades outnumbered upgrades by 3-to-1 last quarter, a decline from the peak ratio reached at the end of 2010, Moody’s Investors Service said.
Moody’s cut 127 ratings of $71.6 billion of state and local debt and increased 43, totaling $4.2 billion, during the second quarter, according to a statement today. Borrowers downgraded included New Jersey, Hawaii and Chicago’s Cook County, Illinois.
The trend reflects the fiscal challenges faced by state and local governments, Naomi Richman, a Moody’s managing director, said in the statement. The municipal market will continue to “face pressure” as the economy recovers, she said.
“The news is somewhat more optimistic for states, but local governments still have a way to go,” Robert Kurtter, a managing director at Moody’s, said today during an economic summit at Rutgers University in New Brunswick, New Jersey.
The ratio of cuts to increases peaked at 4.6-to-1 in the fourth quarter, and remains near historic highs, Moody’s said. Last quarter was the tenth-consecutive period that downgrades outnumbered upgrades, Moody’s said.