As of Friday morning, major indexes were on track to post their second monthly decline in a row, due to mixed earnings releases and disappointing GDP numbers. On a positive note, Apple released stellar earnings this week, with results coming in much higher than expectations due to record revenues and iPhone sales. Microsoft, on the other hand, came in mixed, with earnings meeting expectations, though they were lower than last year’s comparable period.
Many energy and energy-related stocks reported earnings and outlooks that dragged on the markets this week, with Chevron reporting a significant drop in quarterly earnings on Friday morning. Investors did get some good news this week, with Wednesday’s Fed minutes pointing to continued accommodative rates in the near-term. Thursday saw weekly jobless claims come in at 265,000, much better than the 300,000 expected. Fourth-quarter GDP numbers were released on Friday morning, showing a 2.6% expansion, compared to Q3’s 5% growth rate, and in contrast to the 3% that was expected. Yields on 10-Year Treasuries were down this week, having started out at 1.82 on Monday and closed Thursday at 1.77. Below, we look at all of Moody’s municipal bond upgrades and downgrades from the past week.
Upgrades
- Joint Water Board of Albertville, Hanover, and St. Michael, MN: Moody’s upgraded this joint water board to Aa3. The Aa3 rating reflects the utility’s strong liquidity and modest debt ratio. The rating also incorporates the utility’s small budget size and healthy debt service coverage.
- Clay, NY: Moody’s upgraded this city to Aa2 from Aa3. The upgrade to Aa2 reflects the continued maintenance of ample reserves and liquidity over the past five years. The rating also factors a large and stable tax base located outside of Syracuse (A1 negative) and a minimal debt burden.
- Wylie Independent School District, TX: Moody’s upgraded this school district to Aa2 from Aa3. The Aa2 reflects the district’s well-managed financial operations, evidenced by a trend of operating surpluses, which resulted in healthy reserves and ample liquidity. The rating is also based on the continuing trend of growth in the district’s sizeable and diverse tax base that we expect to continue in the near-term, above average socioeconomic indices, and sustained enrollment growth. In addition, the rating incorporates elevated debt burden expected to moderate over time given no additional borrowing plans.
- Tacoma, WA: Moody’s upgraded this city to A1. The upgrade is based upon continued healthy liquidity and debt service coverage in combination with the system’s simplified and stable operational profile, which is reflected in a transition away from capital intensive landfill activities to contract disposal. Also considered are the system’s favorable credit factors which include: a stable waste stream supported by a court-tested flow control ordinance; an economically diverse service area; a healthy balance sheet; and standard bondholder protections.
- City of Venice, FL: Moody’s upgraded this city to Aa2. The Aa2 rating incorporates the system’s moderate size, stable, affluent and mostly residential service area, and diverse customer base. The rating is additionally supported by very strong financial metrics including high cash levels and healthy pro forma debt service coverage; below average but growing debt burden; track record of timely rate increases, regulatory compliance and capital planning; and improved legal provisions.
Downgrades
- Catholic Health Initiatives: Moody’s downgraded this organization to A2. The downgrade to A2 follows a fourth year of declining operating performance, and a second year of very poor consolidated results. This is CHI’s third one-notch downgrade in three years. Other factors driving the weaker credit profile include high leverage (which has more than doubled since 2011), declining liquidity, rapid expansion, high capital spending, and poor same-store utilization and revenue growth.
- Dallas County Schools, TX: Moody’s downgraded this school board to Baa1. The Baa1 GOLT rating reflects the district’s weak financial position and very narrow liquidity due to increasing support for a non-essential bus safety-camera enterprise that has fallen short of officials revenue projections to date. The district’s rating nevertheless reflects the support of the substantial and diverse Dallas County tax base along with an average socioeconomic profile and the district’s modest debt burden. The district has no student enrollment or direct instruction function; it is an unique entity whose primary function has traditionally been to provide bus service to public schools in the Dallas region.
