Whoops on munis

Moody’s Credit Rating Service just announced the ominous trend that credit quality in the municipal bond market is falling at the fastest rate since the collapse of Lehman Brothers in 2008. Data released showed that 5.3 times as many municipal bonds were credit downgraded over the three last months than were upgraded.

“Downgrades dominated rating revisions across all public finance sectors except for healthcare,” said Assistant Vice President-Analyst Dan Steed, author of the Moody’s report. “A rapid deterioration in credit metrics led to a higher-than-average 14 multi-notch downgrades.”

Often sold to individuals as “conservative investments with tax-free income”, munis in such states as California, Illinois, New Jersey and Pennsylvania are increasingly looking like high-risk rolls of the dice. Moodys via CalWatch