News & Views

In a deep dive exploring how ratings agencies judge the creditworthiness of municipal bonds, the Journal cross-referenced IMTC data with information from Moody’s, S&P, Fitch and Kroll.

In a feature-length article titled “Muni-Bond Ratings Are All Over the Place. Here’s Why,” financial journalist Gunjan Banerji takes a deep dive into the rating methodologies utilized to assess municipals. 

IMTC provided The Wall Street Journal with data from our NOVA platform for the report, which the Journal cross-referenced with information from Moody’s, S&P, Fitch Ratings and Kroll Bond Rating Agency. Banerji notes that some of the largest ratings firms optimistically rate debt-ridden cities due to “widely disparate ratings, errors in analysis and a fight for market share.”  

Check out the following excerpt below:  

S&P tends to issue higher ratings on riskier bonds than its biggest competitor, Moody’s. When both firms rate a bond and Moody’s calls it junk, S&P’s rating is higher 80% of the time, according to data from research firm Municipal Market Analytics as of June. For debt considered investment-grade by Moody’s, far outnumbering junk bonds, the two firms’ ratings are closer. S&P is the top choice for municipalities hiring just one rating firm, according to MMA. 

Spokesmen for S&P and Moody’s said their ratings have been strong indicators of default risk. 

The ratings business has also been roiled by newcomers such as Kroll, which often rates debt higher than its competitors and has almost a 10% market share of municipal debt outstanding, according to MMA data. 

Kroll rates bonds also rated by Moody’s, S&P or Fitch higher roughly 60% to 80% of the time, according to a Journal analysis of data on thousands of bonds issued over the past decade from Fitch, Kroll and data provider IMTC. 

To read the full article, head over to The Wall Street Journal.