The outlook for Michigan’s general-obligation debt rating was changed to positive from stable by Moody’s Investors Service, citing the state’s progress toward stabilizing its budget.
Moody’s assigned the state’s Aa2 rating, third highest, to the planned sale of $200 million in bonds. The change in outlook on $5.1 billion of debt indicates the credit score may be in line for a raise.
The revision “reflects Michigan’s progress in rebuilding financial reserves and running structurally balanced budgets, which signals an improving credit trajectory,” Moody’s said yesterday in a report. After the auto industry’s crisis in 2009, “Michigan is rebuilding its balance sheet.”
Revenue and profit have risen at General Motors Co., Ford Motor Co. and Chrysler Group LLC, controlled by Italy’s Fiat SpA, since bankruptcy and restructuring hobbled the industry. The big three U.S. automakers earned a combined $13.5 billion last year. Related jobs in Michigan have increased 34 percent since their January 2009 low, according to the Center for Automotive Research in Ann Arbor.
Michigan’s unemployment rate in January was 8.9 percent, compared with a national 7.9 percent rate, according to government data compiled by Bloomberg.
The change in outlook by Moody’s shows confidence in Governor Rick Snyder’s willingness to tackle such issues as reducing retiree health-care liabilities by more than $5 billion and balancing the budget, state Treasurer Andy Dillon said yesterday.
“It’s just good financial management and the state’s being rewarded for that,” Dillon told Mark Crumpton on Bloomberg TV’s “Bottom Line.”
Dillon said bond markets in the past punished Michigan because of the cyclical nature of the U.S. auto industry.
The extra yield demanded by investors in the $3.7 trillion municipal market to own debt from Michigan and its municipalities, relative to top-rated bonds, narrowed to 0.58 percentage point on March 13, matching the lowest since April 2009, according to data compiled by Bloomberg. The spread has since widened to 0.63 percentage point.