Market takes note of S&P’s big GO downgrade for default on unrated bonds

S&P Global Ratings' seven-notch downgrade of a Chicago suburb's full faith and credit pledge for default events on unrated revenue bonds casts a spotlight on management and governance factors and the risks they pose to the value of general obligation bonds. The issue has captured the attention of market participants with Fitch Ratings, which does not rate Bolingbrook, Illinois, explaining how it would view the situation and Municipal Market Analytics opining on the action's impact.

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The reduction in reserves for the Texas Permanent School Fund's bond guarantee program does not impact the program's triple-A ratings, according to rating analysts. The fund’s reserves were lowered to 0.25% from 5% to help increase the availability of the guarantee by $7 billion to $9 billion after capacity shrank to less than $27 million. With the application process for the guarantee taking one or two months, Noe Hinojosa, president and CEO of Estrada Hinojosa & Company, warned the cost of waiting to sell bonds "could be higher in this volatile market."

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The Financial Industry Regulatory Authority fined Quint Capital Corporation $35,000 and its chief executive officer Alexander Quint $10,000 for allowing a broker banned by regulators to work for the firm on 25 municipal securities transactions.

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Municipal issuers in the Southeast sold $69.5 million of bonds in 2022, a 13.1% year-over-year decline as governments across the region decreased capital spending and braced for a potential recession

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Puerto Rico Oversight Board member Justin Peterson criticized what he said is the board’s attack on revenue bonds in the lien adversary proceeding and called for state attorneys general to intervene.

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Municipals sold off Wednesday in secondary trading, with the short end seeing the largest cuts, as several large deals priced in the primary. Triple-A benchmark yields were cut six to 16 basis points.

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