WASHINGTON — Moody’s Investors Service may downgrade $10 billion of Garvee bonds, the ratings agency announced Tuesday, because of the increasing uncertainty of the federal revenue stream that backs them.
The announcement from Moody’s comes two weeks after Fitch Ratings made a similar move. Moody’s said the most recent two-year transportation law is a break from traditional longer-term five or six year authorizations, especially in its reliance on general fund transfers to prop up the sagging highway trust fund. The revelation last week that some those revenues might also be sequestered also influenced the decision.
The increased frequency of reauthorization risk and reliance on general fund transfers, which the White House Office of Management and Budget recently announced would be subject to budget sequestration, if the cuts go forward as scheduled in January, is indicative of increased political risk to the federal aid highway program,” Moody’s said in a statement.
Moody’s expects to conclude its review of the affected debt in 30 to 60 days, the agency said.