Downgrade Watch: First Greece, Then Spain, Now Portugal... Make it Stop

Well, can't say we didnt see it coming. Portugal was downgraded with impunity by S&P from AA- to A+ on the belief that "the government's structural reform measures relating to the economy and public finances have proven insufficient to bring about convergence with the 'AA' peer group." And what a high quality peer group it is.

Analyst Trevor Cullinan does not mince his words: "In our opinion, Portugal faces increasingly difficult challenges as it tries to boost competitiveness and lift persistently low growth. This, together with a heavy general government debt burden, leads us to believe that Portugal is unlikely to make the necessary structural improvements to remain in the 'AA' peer group."

While this is totally expected, sovereign CDS traders who were long Portugal CDS have taken half a day off today.

Next up: Belgium, Italy, Germany and the U.K.

For full report click here.