On the eve of a major bond sale, Maryland quietly made a very loud move: the state cut loose Moody’s after decades together and brought in Kroll Bond Rating Agency instead. The shakeup landed just as Maryland prepared to sell roughly $800 million in general-obligation bonds, a year after Moody’s knocked the state down from Aaa to Aa1 and left it standing outside the small club of top-rated states.
Treasurer Dereck Davis insisted the change was not a hunt for a softer rating, but the result of a working relationship with Moody’s that he said had simply broken down. Even so, the timing has raised eyebrows among lawmakers and market watchers who are keenly aware that the state is heading to market without its longtime rater on the marquee.
The Treasurer’s office hired Kroll Bond Rating Agency and paid about $75,000 for its review, according to Maryland Matters. A January report from KBRA assigned Maryland a AAA rating with a stable outlook and pointed to the state’s reserves, recent budget actions, and overall fiscal framework. State officials say that verdict, paired with top marks from Fitch and S&P, keeps Maryland’s bonds in the upper tier for investors in this week’s sale.
Moody’s, for its part, had already delivered a sting. On May 14, 2025, the firm cut Maryland’s issuer rating from Aaa to Aa1, warning that the state was vulnerable to shifting federal policies and carried elevated fixed costs. The downgrade, which was covered by AP and other outlets, ended Maryland’s long run among the handful of states with the highest possible rating and kicked off the political and policy debate now simmering in Annapolis.
How the ratings shook out
Despite the Moody’s cut, Maryland headed into this week’s sale with AAA grades from Fitch, S&P, and KBRA on the bonds tied to the offering. That is not a complete clean sweep, though. S&P revised the outlook on the state’s outstanding debt to negative, and in a detailed explanation, S&P Global Ratings pointed to structural budget pressures as a key concern.
The Treasurer’s rating-agency page, which lists all current scores, shows Moody’s at Aa1 while the other agencies remain at AAA, according to The Treasurer’s office. Officials there say the mix still sends a strong signal to investors ahead of the sale, though it is a more complicated picture than the clean Aaa sweep Maryland enjoyed for years.
What officials and experts say
Davis has been blunt about why he walked away from Moody’s. He told lawmakers the relationship had become “toxic” and recalled saying, “To hell with Moody’s,” according to Maryland Matters. He stressed that hiring KBRA was his decision and rejected suggestions that the state had “forum-shopped” for a more favorable rating.
Instead, Davis argued that investors would make up their own minds once the bonds hit the market and predicted “robust bidding” that would show demand is still strong despite the rate shakeup. In other words, if the sale goes smoothly, he is betting the market will care more about Maryland’s balance sheet than its breakup with Moody’s.
Why the move matters
Rating-agency drama may sound like inside baseball, but it can carry real costs. The Government Finance Officers Association warns that cutting ties with a rating agency is still “a relatively infrequent occurrence” and can bring “serious repercussions” for an issuer’s credit profile and borrowing costs. In its guidance, GFOA urges governments to weigh fees, administrative burdens, and investor access when selecting and managing rating-agency relationships.
Those cautions help explain why some Maryland lawmakers urged a go-slow approach even as others cheered the decision to move on from Moody’s. The stakes are not just political. If investors see the switch as a red flag, taxpayers could eventually feel it in higher interest costs.
Market test and the road ahead
For now, the immediate test is simple: how this week’s bond sale goes and whether investors treat Maryland’s debt as just as attractive without Moody’s name on the ratings list. Coverage in Bond Buyer and comments from market analysts highlight the state’s strong reserves and recent budget steps, which help explain why the other agencies held their AAA ratings.
Still, analysts caution that the longer-term question is not who sits in judgment, but what the numbers look like. The real test, they say, is whether lawmakers in Annapolis follow through with sustainable fiscal changes that keep Maryland’s ratings, and its borrowing costs, from drifting in the wrong direction over the medium term.
