It seems like no asset is safe in this coronavirus-stricken market—even municipal bonds, which were once seen as some of the safest debt issues in the fixed income space. S&P Global Inc and Moody’s Corp, two of the largest credit rating agencies, issued downgrades that included municipal bonds.
“Municipal bonds tied to specific projects or taxes are also being downgraded. S&P recently cut the ratings on revenue bonds backed by a student housing project in Corpus Christi, Texas, by six notches, taking the debt from the lowest notch of investment-grade deep into junk territory,” a Wall Street Journal report noted. “Falling tax collections are also hitting bonds backed by governments’ broad taxing powers.”
And it’s not just downgrading that prospective municipal bond investors need to watch. It’s having a boomerang effect on insurers that guarantee these bonds.
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by BEN HERNANDEZ on MARCH 25, 2020