Moody's Corp, owner of one of the three major debt-rating agencies, reported a 56% rise in second-quarter profit, but cautioned that the second half of the year would be difficult.
The company, which was sending a top executive to testify in Washington this week about rating agencies' roles in the financial crisis, counted higher profits in the second quarter because debt issuance rose from the same quarter a year ago. But global corporate debt issuance stalled in June, and July appears weaker, according to data.
The value of investment-grade corporate bond issues up to July 26 was 44% lower than in June as the Greek debt crisis and political wrangling over the US debt ceiling continue. New junk bond issuance was 67% less.
'We expect more challenging debt issuance conditions in the US and Europe in the second half of 2011 as compared to the first half of the year,' chief executive Raymond McDaniel said.
The company has played an accidental part in depressing bond issuance. As the agency has taken steps like warning that it may change the outlook on the US' triple-A rating, and cutting sovereign ratings for Ireland and Portugal, some corporate bond issuers have grown reluctant to sell debt. Moody's reported net income of $189m, or 82 cents a share, compared with $121m, or 51 cents a share, a year earlier.
Rating agencies have been at the forefront of debt crises in the US and Europe. They downgraded Greece's debt and threatened to lower ratings on US government obligations.
Politicians in both regions have criticised the agencies for making the problems worse after helping create the financial crisis. The agencies fueled excessive lending and the housing bubble by putting undeserved triple-A ratings on mortgage-related securities. Many top-rated securities later defaulted.
They made hundreds of millions of dollars rating structured finance products linked to mortgages.