Do bond rating agencies discriminte municipal bonds?
Thanks Jeff for suggestion this article: States and Cities Start Rebelling on Bond Ratings (03/03/08, Creswell and Bajaj).
Issued by state or local governments, municipal bonds are generally much safer than those issued by corporations. The level of safeness is call "credit quality," the extent to which a bond issuer will be willing and able to pay back its debt. This is reflected by bond ratings assigned by several bond ratings agencies. The ratings will in turn affect the interests (borrowing cost) for the payback of these bonds.
In recent weeks, some governmental officials complain that ratings firms assign municipal borrowers low credit scores compared with corporations. And it is the taxpayers who ultimately pay the price, in the form of higher fees and interest costs on public debt. Bond rating agencies, however, have their rationales for the practice of double-standards.