U.S. Downgrade Will Have Impact on Munis

The Bond Buyer reports:

The downgrade of the U.S. by Standard & Poor’s to AA-plus from AAA will reverberate through the municipal bond market.

Some states may lose their triple-A ratings. Other gilt-edged muni credits may be jeopardized. Munis with direct backing from the federal government, such as some housing bonds, will face downgrades, at least by Standard & Poor’s.

Those could be some of the nearer-term implications for muni credits. Longer term, state and local governments are likely to see less funding from the federal government as Washington struggles to get its fiscal house in order. What happens to state and local government bond ratings will depend to a large degree on how they manage with less federal funding.

The God that failed.