Municipal Bond Rating Changes Raising Questions

One of the major credit rating agencies, Standard & Poor’s, announced its intention to redefine its rating system for municipal bonds issued by all state and local governments, to better reflect the different measures od creditworthiness applicable to public sector entities. For more background, visit their website’s section on “understanding ratings.”

Governing magazine writes that industry analysts have noted added variability in ratings that have arisen since S&P made these changes. From their article:

Since last fall, when S&P released new scoring criteria, the agency has been reassessing ratings for thousands of local governments. Generally, and as predicted by S&P itself, the new criteria resulted in more upgrades of governments than downgrades. But a Janney Montgomery Scott analyst pointed out in his July note on the bond market that those changes have not put S&P’s ratings more in line with competitors Moody’s Investors Service and Fitch Ratings.

In some cases, rather, agencies’ ratings scores for the same local governments have diverged even more.

Read the full article in Governing magazine online.




Michael Sanderson

Executive Director Maryland Association of Counties