Moody's: U.S. Downgrade Would Trigger 7,000 Municipal Ratings Cuts

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Moody’s will downgrade at least 7,000 top-rated municipal credits if the U.S. loses its AAA grade, according to a statement from the ratings agency.The automatic downgrades that will affect $130 billion in municipal debt directly linked to the U.S. government, including mortgage-backed bonds secured by the U.S., as well as agencies like Fannie Mae and Freddie Mac.

Moody’s will also review other top-rated securities indirectly linked to the federal government, such as state governments, housing authorities, and nonprofits.

Bloomberg reports that that 15 U.S. states currently have AAA ratings. Other top-rated issuers include 440 local governments, 100 state housing bond programs, 43 higher-ed and nonprofits, 43 state revolving-fund bond programs, the Tennessee Valley Authority, and the Bonneville Power Administration. 

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