featured graphic for California State Treasurer Fiona Ma

Moody’s upgrades California’s General Obligation bonds to Aa2

Just two months after California’s bond rating was upgraded by Fitch Ratings, the state’s General Obligation (GO) bonds have been upgraded again. Moody’s Investors Service announced that it has upgraded the state’s GO bonds to Aa2 from Aa3. This action comes ahead of the state’s planned competitive pricing of approximately $1.1 billion of taxable GO bonds on Wednesday, October 16th.

“The upgrade of California’s GO bonds to Aa2 incorporates continued expansion of the state’s massive, diverse and dynamic economy and corresponding growth in revenue,” Moody’s reported.

Moody’s also praised “the state government’s disciplined approach to managing revenue growth indicated by its use of surplus funds to build reserves and pay down long-term liabilities.”

California State Treasurer Fiona Ma said this approach has been furthered in Governor Gavin Newsom’s prudent decisions on spending during this legislative session.

“Taken together, these are all positive outcomes for California — lower borrowing costs, a favorable interest rate environment, improved ratings, and a continued commitment to building reserves for the inevitable downturn in the economy,” said Treasurer Ma. “These actions will make the state more resilient and ensure that we are better prepared to deal with whatever the global economy has in store in the future.”

Treasurer Ma has also shown fiscal prudence since taking office in January 2019, selling $5.4 billion in bonds that refinanced older, higher interest rate debt resulting in approximately $2.1 billion in reduced debt service costs over the remaining life of the bonds.

In August 2019, California’s credit rating was upgraded by Fitch Ratings from AA- (minus) to AA. In publicizing the rating change, Fitch cited, among other reasons, reductions in budgetary borrowings, and the continuing commitment to set aside funds for California’s rainy day fund.

In connection with the GO bond upgrade, Moody’s also upgraded the rating on various other state-related debt with ratings that are tied to the GO bond rating. The State of California is by far the largest state in the US. Its nearly $3.1 trillion gross domestic product accounts for just over 14% of the nation’s economic output. It is home to almost 40 million residents, or just over 12% of the nation’s population.

This article was released by the California State Treasurer’s Office.