The fund credit quality ratings on nine fixed-income funds have been adjusted, reveals S&P
Standard & Poor's said that its fund credit quality ratings on nine fixed-income funds have been adjusted largely based on the latest monoline insurer downgrades.
At the same time, the fund volatility ratings on 12 fixed-income funds have been revised due to continued market volatility or changes to the maturity profile. Additionally, one fund credit and volatility rating was withdrawn.
The prolonged volatility the funds have experienced is primarily due to the above-average price movements for securities held in the funds, resulting from price markdowns, especially within the asset-backed securities (ABS), mortgage-backed securities (MBS), and financial services sectors.
With the exception of one MBS fund, the fund credit rating actions were on tax-exempt fixed-income funds with material exposures to Ambac Assurance Corp. and MBIA Insurance Corp.
S&P lowered its financial strength ratings on these companies to 'AA' and placed them on CreditWatch Negative on June 5, 2008. The rated funds' exposures to bonds insured by Ambac, MBIA, and other non-'AAA' rated securities have moved the average credit quality of the funds into a lower rating category.
Consistent with the monthly surveillance of our fixed-income fund ratings, S&P will continue to monitor these funds for any applicable rating changes. It is important to note that the downgrades of MBIA and Ambac did not affect any money-market fund that S&P rates.