No Mass of Public Finance Downgrades Yet, Movement After Evaporating Government Support Better Indicator
After the Global Financial Crisis of 2007-08, we saw U.S. public finance downgrades (by Moody’s Investor Service) peak in 2012 and outpace upgrades from 2009-2014.
Downgrades have only slightly outpaced upgrades in the second and third quarters of 2020, but the pace will likely increase as federal relief evaporates.
We continue to expect downgrades will outnumber upgrades, probably for years. Future federal relief, or its absence, will be a chief contributor to the magnitude of the future public finance rating downgrade to upgrade ratio.