Q1 2026 Municipal Credit - A Turn In Credit Quality? War, Federal Funding And Risky Assets, And An Update On NYC Congestion Pricing

2026-04-21 16:00:00 ET

By Patricia Healy, CFA

Municipal credit quality continues to be resilient. S&P reports that upgrades exceeded downgrades in most sectors in 2025, elevating average municipal ratings. Smith’s Research, which combines three rating agency actions, shows similar positive-weighted activity. However, the first quarter of 2026 saw a reversal, with downgrades exceeding upgrades by S&P. It makes sense that the ratio of upgrades to downgrades is narrowing or reversing after several years, with positive ratings actions exceeding negative actions. We have wondered for years when the credit outlook might change, since it has been strong for so long, even with challenges....

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