The rating firm warns that the risk is rising that the state could have trouble paying its bondholders if the budget stalemate in Sacramento doesn’t end soon.
Two out of three major bond-rating firms now agree: California’s credit grade should begin with a B — a dismal comment on the state’s finances.
Moody’s Investors Service on Tuesday cut the state’s debt rating two notches, to Baa1 from A2, warning that the risk was rising that California could have trouble paying its bondholders if the budget stalemate in Sacramento didn’t end soon.
The firm said the state remained on its “watchlist” for further downgrades.
Moody’s Baa1 rating is just three notches above the level at which California’s $59 billion in general obligation bonds would be considered “junk,” or no longer investment-grade in quality. Next would be Baa2, then Baa3, then the junk rating of Ba.