Impact of Political Willingness on Municipal Credit Quality
Authors and Contributors
U.S. Municipal Bond Team
Over the past several years, a number of rating actions have affected state and local credits. The most frequently cited reasons for negative rating actions include depressed economies, poorly funded pension systems and fiscal stress caused by declining energy prices. Traditional credit analysis, which focuses on economic factors, demographics, debt burden (including pensions), finance, liquidity and governmental framework, among other factors, is useful in predicting these rating actions. However, we have also seen negative rating actions caused by political discord, which most frequently occurs when there is a split in the political makeup of the executive and legislative branches of government. With the gap between the views of Democrats and Republicans widening, we believe it is increasingly important to include political factors when analyzing municipal credits.
On January 31, 2018, The Boston Company and Standish merged into Mellon Capital to form a combined entity, BNY Mellon Asset Management North America Corporation. Effective January 2, 2019, this entity was renamed Mellon Investments Corporation.