Moody's Investors Service downgraded more municipal bond par value than it upgraded in 2015.
It was the seventh consecutive year that Moody's downgraded more par value than it upgraded in U.S. public finance.
Moody's downgraded $203 billion in United States public finance and upgraded $152 billion, according to a report that Moody's released Monday.
On a more positive note, upgrades outnumbered downgrades, 554 to 519. For U.S. public finance, it is the first year in the last seven in which Moody's upgrades outnumbered downgrades.
By par value, Moody's biggest rating actions of the year were: a downgrade to various Puerto Rico issuers totaling $55 billion, with the general obligation rating declining to Caa3, a downgrade of New Jersey's GO rating to A2 affecting $32 billion, a downgrade to Illinois ratings, including one of its GOs to Baa1, affecting $32 billion, an upgrade to the New York City Municipal Water Finance Authority to Aa1 affecting $25 billion, an upgrade to New York's Metropolitan Transportation Authority to A1 affecting $22 billion, and a downgrade of Chicago ratings, which sent its GO rating to Ba1, affecting $13 billion.
In the local government sector the balance of numbers and par values of up and downgrades were similar to that of the entire U.S. public finance area. In the state and state-related sector, there were 29 downgrades and 26 upgrades but there were $188.4 billion in downgrades versus $69.2 billion in upgrades.
In 2015 the municipal utility and particularly the infrastructure and housing sectors were dominated by upgrades rather than downgrades, measured by both numbers and par value. However, the higher education/not-for-profit sector had 52 downgrades and 10 upgrades and $5.7 billion in downgrades and $1 billion in upgrades.
"The Moody's data shows good progress for public finance overall, but investors still need to pay attention to individual credit quality," said PNC managing director Tom Kozlik. "Investors should be most concentrating about the causes of the upgrades and the causes of the downgrades.
"The issuers who were upgraded were generally those who several years ago realized there is a new fiscal reality and adjusted to it," Kozlik said.
"They realized revenues were coming in at a slower than historical pace, so they made adjustments on the revenue side. They also noted that expenditure demand was high, so they tried to control it as much as they could," he said.
"Most local governments are still being downgraded due to multi-year structural imbalances," Kozlik added.
