More bad news. S&P downgrades K's of AAA Munis.

[henryclay]

They told us there would be more. If the politicians howled about the downgrade last week, just imagine what we'll start hearing after this. I really do hate to see it, but we all should have known it had to come sometime. Thank God I'm out of debt.

I'm beginning to get the impression that the financial industry is going to tell the politicians just whose tail wags the dog.

Standard & Poor’s lowered the AAA ratings of thousands of municipal bonds tied to the federal government, including housing securities and debt backed by leases, following its Aug. 5 downgrade of the U.S.

The rating company assigned AA+ scores to securities in the $2.9 trillion municipal bond market including school- construction bonds in Irving, Texas; debt backed by a federal lease in Miami; and a bond series for multifamily housing in Oceanside, California. Olayinka Fadahunsi, an S&P spokesman, said he couldn’t provide a dollar figure on the affected debt.

S&P also cut ratings on securities backed by Fannie Mae and Freddie Mac, prerefunded issues and munis repaid by using federal assets, also known as defeased or escrow bonds. No state general-obligation ratings were affected and the company said some may remain unchanged.

www.bloomberg.com/news/2011-08-07/muni-market-prepares-for-loss-of-aaa-ratings-as-s-p-downgrades-u-s-credit.html

[BeenThere...DoneThat...]

...interesting point to raise about who's the tail and who's the dog...

...and I'll be interested to see what the local news starts showing on this issue...

[verrip1]

Many muni bond funds have limited their holdings to AAA only, and promote that as a marketing tactic. They must divest themselves of all of their AA+ holdings immediately upon a downgrade like this. That will put a temporary glut of these issues on the market, and prices should drop significantly until they can be absorbed into the wider market.

There should be some short term price bargains out there for people who choose to add to their muni bond holdings.

[fairlycrazy23]

Aug 9, 2011 19:31:53 GMT -5 @toughtimes said:

Not surprising at all, especially since many of these cities get bucks from the Feds too.

Some of the pundits where saying this was inevitable

[Bluerobin]

S&P is trying to prove they are still germaine. What asses! They are trying to beat the govt into submission. In the end, they will be ignored. They are really over stepping to try to prove they are right!

[ugonow]

But yet,as stocks fall,people are still flocking to government debt for safety.