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Dec 21 2007 12:00am EDT
Munis Back Away From Ratings-Agency Domination
In the world of credit ratings, it's generally acknowledged that the most overrated securities are structured products, while the most underrated securities are municipal bonds. (You have no idea how nice it is to be able to use the words "overrated" and "underrated" literally.)
Many investment-grade munis would have AAA ratings without insurance if they were ranked the same way as corporate debt. Every state except Louisiana would be Aaa, based on the scale for companies, which ranks borrowers on the probability of default, according to the report by Moody's.
When Wisconsin sold $154.6 million of bonds for highways, public buildings and water improvements on Nov. 15, it paid a yield of 3.87 percent for debt due in 2016. The same day, insured Wisconsin bonds sold in October with a similar maturity yielded 4 percent in the secondary market where existing issues trade.
