Moody’s Investors Service placed its ratings on five Aaa-rated states on watch for downgrade, saying if the U.S. government’s ratings were to be lowered, those states would face probable cuts as well.
The ratings agency’s action on Maryland, New Mexico, South Carolina, Tennessee and Virginia affect a combined $24 billion of general obligation and related debt. It follows Moody’s announcement last week that it would consider a downgrade on the U.S. government’s bond rating, citing the “rising possibility that the statutory debt limit will not be raised on a timely basis,” which would lead to a default on U.S. Treasury debt obligations.
Moody’s on Tuesday said it would review each of the five states on a case-by-case basis and plans to act on the ratings within seven to 10 days following a sovereign action.