Moody's Downgrades Greece

Unsurprisingly Greece has been downgraded by another ratings agency. Moody's has cut Greece's sovereign debt rating to the lowest possible level (from C to Ca).

The Ca rating means that the bonds are classed as being in "default".

Moody's are of the view that there is both a "distressed exchange" and "outright default".

Meanwhile, it is evident that (despite what some may claim and hope), the markets do not believe that the bailout is going to work, Zero Hedge reports the following:

"Nevertheless numerous hedge funds have been accumulating a range of Greek bonds that are governed by foreign law in the hopes of of making a legal challenge."

The media will soon begin to leak details of the actual participation rate, this is very likely to be below the percentage in the hype being spewed forth by the politicians.

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Moody's States The Bleedin' Obvious

Moody's claims that a disorderly default would increase likelihood of Greece exiting Euro area.

No kidding???!!

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The European Financial Clusterfuck

The European financial clusterfuck continues this week unabated.

Here are but a few headlines to start the week with:

- Moody's has issued a downgrade warning on France.

- Despite a landslide victory in Spain, for a party that will implement further austerity measures, markets are falling and Spanish bond yields are rising.

- Hungary has asked the EU and IMF for financial assistance, oddly enough they haven't put a figure on how much they actually want/need!

- The European Commission has sated that the "cure" for Europe's ills are Eurobonds. This has been publicly slapped down by Germany, which stated that Eurobonds were not a "cure" at all.

- The EU's Jean-Claude Juncker says if France were to lose its AAA rating so would the EFSF.

Wrt the latter point, so what?

The EFSF is a busted flush anyway, a downgrade in rating is completely irrelevant.

Oh, and if anyone is remotely interested, Belgium's politicians have yet again failed to form a government (Belgium has now been without a government for 526 days).


The week starts as it means to go on, badly!

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The Greek Tragdey - The Irony!

Spanish government debt has been put on review for downgrade by Moody's.

For why?

It seems that the Greek bailout has increased risks for lenders to Spain.

Oh the irony!

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Ireland Downgraded To Junk

Moody's has downgraded Ireland's rating to junk, from Ba1 from Baa3. They are of the view that Ireland will need a secondary bailout.

Ireland now joins Portugal and Greece in the non investment grade hall of shame.

Unsurprisingly the European Commission has issued a statement "regretting" Moody's decision. However, as with all ratings agencies' predictions of doom, there is a very real danger that they become self fulfilling prophecies. The fact the the EC "regrets" it is irrelevant.

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Portugal Goes The Way of Greece

Moody's have cut Portugal's credit rating by a "whopping" four notches, from Baa1 to Ba2, with a negative outlook.

There are now expectations in the markets that Portugal will need a Greek style second bailout.

Self fulling prophecies are very dangerous!

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Moody's Threatens To Downgrade UK

Moody's, having had a "pop" at the USA, has now also had a go at the UK.

The FT reports that Moody's has warned that the UK could lose its AAA credit rating, if growth continued to slow and if the British government decided to slow down its fiscal consolidation plans.

Needless to say the market took fright, and Sterling fell to a one-month low against the euro and fell against the dollar and the yen.

As ever, with currency movements such as this, there are organisations that manage to make a nice living out of them; even if the movements are based on "what ifs" warnings issued by ratings agencies that were once giving AAA ratings to toxic financial products.

People, quite correctly, ask why do markets "listen" to the now discredited ratings agencies?

Sadly the answer is simple, the markets and ratings agencies need each other and feed off each other. Money can be made by neither, without the other.

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Moody's Displays Irony

Having downgraded Greece, Moody's (showing that they have no favourites) have also threatened to downgrade the USA if politicians in the US do not agree to raise the debt ceiling in the coming weeks.

It is of course more than a little ironic that, in order to maintain its credit rating, the USA has to borrow (and be able to borrow) more money.

Needless to say with a "booming" economy (albeit pumped up on more debt) Wall Street and companies such as Moody's (who sold toxic assets, and helped sell toxic assets, with a AAA rating pre slump) will do very well.

Now that's "irony" for you!

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