Downgrades Effect: Confusion and Frustration is Start Spreading Through Other Cities, Countries and Municipalities

This August is very special month, US debt has been downgrade from AAA cut to AA+. But the tiny city's credit rating was reduced to triple-B from double-A minus—a five-notch tumble. "For us to have been downgraded with the problems of the economy, we were expecting that," says Gary Fields, Manassas Park's finance director. "But maybe a notch. Maybe two notches. We were quite surprised at the size of the downgrade. I don't really understand."

The frustration and stressfull is spread to the city, however similar confusion and frustration is spreading through other cities, counties and municipalities bruised by steep downgrades. as reported from WSJ, Since June 2010, S&P, Moody's Investors Service and Fitch Ratings have made 196 so-called super-downgrades on municipal bonds, according to research firm Municipal Market Advisors.

The true impact super-downgrades, it can be pushed yields on the downgraded municipal bonds higher and could increase borrowing costs the next time affected cities, counties and other municipalities need to sell bonds.