Default Risk: Single A-rated Muni versus AAA-rated Corporate Bond

The details of rating Municipal and Corporate debt are necessarily different; municipalities are judged by tax revenues and taxable base while a corporation it’s sales revenue and assets/liability ratios.  The ratings controversy arrives from the simple likelihood of any eventual default.  Moody’s own historical analysis shows that single A rated municipalities are less likely to default then AAA corporates.
 
The following chart illustrates the discrepancy: 

Moody’s 10 years of default

Investment grade includes AAA, AA, A and Baa rated. 

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