S&P Rolls Out Muni Downgrades

Standard & Poor’s on Monday began cutting ratings for municipal bonds directly linked to the U.S. government’s credit rating.

The downgrades followed Standard & Poor’s decision Friday to knock the United States down to AA-plus from AAA.

As expected, the agency lowered to AA-plus from AAA its ratings on defeased bonds backed by U.S. Treasury securities .

Standard & Poor’s lowered its ratings to AA-plus from AAA on bonds backed by federal leases. The bonds included issues sold for Miami, Tacoma, Wash., and the Atlanta Downtown Development Authority.

Standard & Poor’s also lowered its fund credit quality ratings on 73 municipal investment funds, citing the funds’ significant exposures — generally greater than 50% — to direct or indirect investments in U.S. Treasury and U.S. government agency securities.

Standard & Poor’s also revised its outlooks on the AA-plus rating for bond insurers Assured Guaranty (Europe) Ltd., Assured Guaranty (UK) Ltd., Assured Guaranty Corp., Assured Guaranty Municipal Corp., and Berkshire Hathaway Assurance Corp. to negative from stable. In conjunction with the outlook change, it also revised the outlooks on project finance bonds backed by these insurers to negative.

Standard & Poor’s lowered the ratings of 10 out of 12 federal home loan banks, as well as Fannie Mae and Freddie Mac. That was expected to impact some housing bonds.

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