{"id":14178,"date":"2023-05-26T11:06:54","date_gmt":"2023-05-26T15:06:54","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/what-the-u-s-credit-rating-moves-mean-for-muni-bonds\/"},"modified":"2023-05-26T11:06:57","modified_gmt":"2023-05-26T15:06:57","slug":"what-the-u-s-credit-rating-moves-mean-for-muni-bonds","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=14178","title":{"rendered":"What the U.S. Credit Rating Moves Mean for Muni Bonds"},"content":{"rendered":"<div id=\"js-article__body\" itemprop=\"articleBody\" data-sbid=\"WP-BAR-0000656338\">\n<div data-layout=\"wrap\n              \" data-layout-mobile=\"\" class=\"\n        media-object\n        type-InsetMediaIllustration\n          wrap\n  article__inset\n        article__inset--type-InsetMediaIllustration\n          article__inset--wrap\n    article__inset--lead\n  \"><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        img-wrap\n        article__inset__image\n      \" itemscope=\"\" itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<\/figure><\/div>\n<p>After Fitch Ratings put the U.S. government\u2019s debt on watch for a negative downgrade Wednesday, Fitch analysts have been busy working out the implications for the $4 trillion muni bond market.<\/p>\n<p>While the credit-rating firm believes Republicans and Democrats will reach a federal spending compromise before any Treasury bills default, Fitch analysts are wary of how a spending deal could hit the revenues of state and local governments.<\/p>\n<div class=\"paywall\">\n<p>\u201cWe\u2019re certainly watching very closely,\u201d said Doug Offerman, a senior director at the firm\u2019s public finance states group. Local governments rely directly on federal funding for healthcare, education and transportation. With federal spending amounting to a third of gross national product, any big change will affect local economies. \u201cIt\u2019s a big footprint,\u201d Offerman said.<\/p>\n<p>Muni bonds make up less than 10% of the U.S. fixed-income market, but individual investors hold a large share of the sector\u2019s thousands of different debt issues. Muni bond prices haven\u2019t moved much in recent days. <\/p>\n<p>Since the federal government bumped into its debt ceiling in January, the Treasury has been spending down its cash and juggling payments. Without a deal to raise the debt ceiling, It could exhaust those resources as early as June.<\/p>\n<p>Missing any payments on Treasury bills would imperil the U.S. government\u2019s AAA rating, said Fitch in its Wednesday announcement.<\/p>\n<p>\u201cThe brinkmanship over the debt ceiling, failure of the U.S. authorities to meaningfully tackle medium-term fiscal challenges that will lead to rising budget deficits and a growing debt burden signal downside risks to U.S. creditworthiness,\u201d said the Fitch release.<\/p>\n<p>Thursday,<br \/>\n        Morningstar<br \/>\n      \u2018s DBRS rating unit also put its U.S. debt rating under review. S&amp;P Global Ratings told <em>Barron\u2019s<\/em> it had taken no action yet.<\/p>\n<p>A small number of local bond issuers might be immediately affected by any federal defaults, said Fitch\u2019s Offerman. Those would include municipal housing authorities with bonds secured by the federal agency mortgage-backed securities.<\/p>\n<p>If Washington makes a substantial change to federal spending levels, that would have longer term implications for a broader range of muni bond issuers, he said. <\/p>\n<p>Hospital systems and higher education rely on federal dollars. But the vast majority of state and local debt issuers have tremendous flexibility to adjust for any cuts in federal spending, Offerman said. Many of those governments have cash cushions plumped by the past decade\u2019s expansion. They also can raise taxes from a variety of sources, and cut their own spending.<\/p>\n<p>Offerman reiterates that Fitch isn\u2019t currently expecting any Treasury defaults\u2014but his muni bond analysts will be watching Washington\u2019s decisions in the coming weeks to see where local impacts might be felt.<\/p>\n<p>Write to Bill Alpert at william.alpert@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.marketwatch.com\/articles\/u-s-credit-rating-muni-bonds-261ae263?mod=markets\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>After Fitch Ratings put the U.S. government\u2019s debt on watch for a negative downgrade Wednesday, Fitch analysts have been busy working out the implications for the $4 trillion muni bond market. While the credit-rating firm believes Republicans and Democrats will reach a federal spending compromise before any Treasury bills default, Fitch analysts are wary of [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":14179,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-14178","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What the U.S. Credit Rating Moves Mean for Muni Bonds | iFintechWorld<\/title>\n<meta name=\"description\" content=\"After Fitch Ratings put the U.S. government\u2019s debt on watch for a negative downgrade Wednesday, Fitch analysts have been busy working out the implications\" \/>\n<meta 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