Here come the downgrades: Fitch cuts state bond rating
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California’s credit rating today suffered the first of what is likely to be a series of new cuts amid the state’s disastrous fiscal outlook.
Fitch Ratings said it downgraded its rating on California’s general obligation bonds to ‘A-minus’ from ‘A,’ and warned that the rating might go even lower.
California already had the lowest credit grade of all 50 states. Most states are rated ‘AAA’ or ‘AA.’
From Fitch:
‘The downgrade to A-minus is based on the magnitude of the state’s financial and institutional challenges and persistent economic and revenue weakening. Fitch expects the state’s finances will continue to be strained through fiscal year 2010 and beyond regardless of any likely outcome to the current budget impasse.’
Last week, Standard & Poor’s and Moody’s Investors Service both put California on notice that they may cut their ratings on the state’s debt.
Although a bond default by the state is highly unlikely (for starters, it would be unconstitutional), investors have been heading for the exits in recent weeks, driving up market yields on California bonds, as I noted in this post earlier today.
-- Tom Petruno