EURUSD Takes Out Lows After S&P Revises Outlook On Belgian Community Of Flanders To Negative, Takes Stocks With It

Tyler Durden's picture

Just because the earlier posturing on Spain by Moody's did little to kill the euro, here comes S&P, hell bent on succeeding where the other corrupt rating agency failed. Let's see if S&P has any more credibility: the agency has just revised its outlook on the Belgian community of Flanders to negative, mirroring the recent action on the "HoldCo" of Belgium, and making it all too clear that Europe will be pushed to the brink to give on the demands by Luxembourg for a united bond issuance entity before any hopes of a moderation on eurobond spreads can be even considered. And sure enough, the EURUSD pulls its now traditional 100+ bps move in a few hours. For all who wonder where stock volatility has shifted to, we suggest you keep a close eye on the chart below. After all, none other than John Paulson said that FX is the trading product of the future. And, as expected, the respective strengthening in the USD is now causing stock futures to trade down to their day's low.


From S&P:


  • We revised our outlook on Belgium to negative on Dec. 14, 2010, reflecting our view of increased risks to the government's creditworthiness due to prolonged domestic political uncertainty.
  • The Community of Flanders is the only Belgium community that we rate at the same level as the sovereign. As a result of the sovereign outlook revision, we are also revising the outlook on Flanders to negative from stable.
  • We may downgrade Belgium, and hence Flanders, if the central government is not able to stabilize debt and move forward on reforms to improve political cohesion.

Rating Action

On Dec. 15, 2010, Standard & Poor's Ratings Services revised its outlook on the Belgian Community of Flanders to negative from stable. The action mirrors our outlook revision on the Kingdom of Belgium (AA+/Negative/A-1+).

At the same time, we affirmed our 'AA+/A-1+' long- and short-term issuer credit ratings on Flanders.


The ratings on Flanders are still supported by strong management commitment and ability to keep budgets under control and bring them back on balance according to European System of Accounts (ESA) standards by 2011, following imbalances in 2009 and 2010. They also reflect the community's contained, though rising, tax-supported debt, good access to liquidity, and expenditure flexibility.

Also factored into the ratings is our view of the sensitivity of Flanders' revenue base to economic cycles, which is translating into a deteriorated consolidated budgetary performance in the current economic slowdown. In addition, bail-out operations in favor of local financial institutions have
led Flanders to deplete its cash surpluses and to incur a significant amount of debt.

Although Flanders posted a weakened budgetary performance in 2009, owing to both decreasing revenues and bail-out operations, we believe that Flanders' effective budget monitoring and strict cost control have contained the deterioration and we expect this to continue. That said, in our base-case scenario, we continue to estimate that Flanders will post limited and temporary deficits after capital expenditures (including capital injections, which are not taken into account in ESA standards) averaging 3%-4% of total revenues over 2010-2011 on a consolidated basis. (For more details of our base-case scenario, see our full analysis on Flanders published June 29, 2010.)

Flanders uses public and private companies to carry out public-service missions and investments, guaranteeing a number of them and transferring
budgetary funds. Because of this, we analyze debt evolution on a consolidated basis. As we expected, tax-supported debt increased to about 60% of total revenues at year-end 2009 from 29% one year earlier, primarily because of Flanders' debt-financed bail-out of KBC Bank N.V. (A/Stable/A-1) and its new guarantee issuances in social housing and health care. In the next two years, in our base-case scenario, we think tax-supported debt could increase, but we expect it to remain at a moderate level compared with national and international peers.

Flanders accounts for 58% of Belgium's GDP, which exceeds the EU-15 average by 6% per capita in purchasing power parity terms. The community's economy is characterized by high labor productivity and large exports, which has somewhat exposed Flanders, like all Western European regions, to the current economic downturn. GDP fell 3% in 2009 and we expect a slow recovery at 1.9% in 2010, in line with the rest of Belgium.


We view Flanders' liquidity position as strong, with comfortable access to short-term credit in comparison with Flanders' modest debt service. In 2010, the community has two committed credit lines, worth €2.0 billion in total, as well as a €1.5 billion commercial paper program.


The negative outlook mirrors that on Belgium, which reflects the likelihood that a lack of consensus on key policy may result in the government not being able to stabilize its debt trajectory and to move forward on reforms designed to improve political cohesion.

If we were to downgrade Belgium, we would also take the same action on Flanders owing to the current framework for intergovernmental relationships between the central government and local and regional governments and the ensuing limits on their financial autonomy.

On the other hand, if we believe that the government's debt trajectory has stabilized or will improve and if some progress is made on other areas
important for strengthening the social contract, we could affirm the ratings on Belgium and Flanders.

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TruthInSunshine's picture

Oh no!

Ireland, Portugal, even Spain & Italy, I can see...


...not Belgium!!!!!!!!!

S&P is racist!!!

dlmaniac's picture

They need to make PIIGS scream in order for investors to stick with TBonds, racism or not.

DoChenRollingBearing's picture

Well that was a fast decline in the Euro. 

All of this volatility in fiats reminds those of us who do NOT trade (against the robots) that really the only safe place to be is with a nice holding of precious metals.

I am not saying ¨all in¨.  5% - 10% is reasonable by almost anyone´s standards.

bankrupt JPM buy silver's picture

90% silver, 1% gold, 1% potash, 8% cash to buy more PM's

merehuman's picture

I replied to you before DoChenRollingBearing on a previous thread but was 503d on submittal of comment. In case this gets posted...Get out while you still can. Tantamount to leaving germany (my country once) during Hitlers time. I know i would rather be in Peru than the US or germany. Its all about family. You are furtunate to have such, get safe and be well friend.

DoChenRollingBearing's picture

merehuman, muchas gracias for your reply!  I am late getting back because I had some ¨work¨ to do today here in Peru.

Peru IS booming, and ever since my farewell pitty-pat (not too bad, but still...) by our pals at TSA, my wife and I have re-opened the idea of moving here.

But, I am not ready to put up with it all down here just yet.  They cut the water off in our sector of Lima for almost the whole day on Monday (no shower...).  And I have family in the USA as well.

One thing I AM GOOD at, my friend, is looking out for No. 1!  Just ask any of my real acquaintances, they´ll tell you I am a selfish bastard (in nicer words).  LOL.

You take care too!

FunkyMonkeyBoy's picture

Oh no, now they're after tin tin.

ZeroPower's picture

Whole week has been a see-saw in the EURUSD since that rally which somehow hit 1.35.

Regardless, after 13180 breaks (thurs? fri?) we'll hopefully be set for June lows...

Hondo's picture

Common sense tells you the Union can't last....the politians are spouting lies and deception to try and prolong the suffering of the people.  Eventually it WILL collapse and it won't make much difference how much debt is issued by whom (and soon to be defaulted on).  The end game in these things are always very clear from the start...only human nature try to bluff through them and make matters geometrically worse.

RobotTrader's picture


Keep in mind "The Formula"

Dow 12,500 = Gold $1,650

Dow 9,000 = Gold $1,000


ZeroPower's picture

Ill take the other side of that. Not because i don't think gold is a good investment (i am on ZH after all...) but because the demand for all non-essential commodities will halt should the recession peak its head back up assuming a much lower (and realistic) equity market.

IQ 145's picture

 Peek. peek its head back up. and b.) gold is not a non-essential commodity. It isn't any kind of commodity. This isn't that difficult to suss out; you could look it up.

IQ 145's picture

 It's not a formula; it's just some arbitrary numbers that someone wrote; why would I want to keep it in mind?

TWORIVER's picture

Maybe wmBanzai7 can incorporate Ned Flanders into this piece somehow. Thanks in advance.

mikla's picture


Belgium just stopped by, and looked like it was having a good day (like every day before).

It liked running uncovered, with the cool air on its hot loins.

In fact, it often ran uncovered.

Unfortunately, mean old S&P is giving it a good talking-to right now.

Manipulism's picture

I can not believe what I just saw:


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Is this fuck real?

This is 1933 in Germany.

Should be namend iNaziApp.

Manipulism's picture

No, a man with no fantasie.

Total untalented.

SheepDog-One's picture

Whens that 4th Reich IApp comin out??

AnAnonymous's picture
Citizen Concepts is a Division of Patriot Applications, LLC
Citizen Concepts is located in Indialantic, FL USA


It reads like Heinlein's Starship Troopers.

Id fight Gandhi's picture

Everyone here should install it and report garbage. People and groups you don't like.its all good.

Problem Is's picture


"I want to report TSA terrorists at airport."

That one is factual Id fight Gandhi...

merehuman's picture

i want to report my neighbor put his garbage out early. Suspicious behavior.

What..? No reward?

By the way, i read a report this am re a fella was shot by police for holding a garden hose. A good neighbor(busybody) called it in.

Should i be afraid to get my mail? glad i am in a small town, away from nuts and thieves.

IQ 145's picture

 There were people who had a sense of humor in Berlin too; for awhile. And then they weren't there anymore. It's so hard to tell exactly where we are on that slippery slope.

greenbear's picture

Yeah, and What's His Face is Time magazine's Man of the Year. 


There is no such thing as a conspiracy, only coincidence.

greenbear's picture

Yeah, and What's His Face is Time magazine's Man of the Year. 


There is no such thing as a conspiracy, only coincidence.

IQ 145's picture

 Oh Gag. I think I have to throw up now.

Dick Darlington's picture

In these retarded govt sponsored and banking cartel controlled "markets" this must be very positive for Belgium. Just look at spanish govt bonds today. Moody's (who?) revised the outlook on Spain to negative this morning. After initial outright widening of roughly 10 bps throughout the curve, miracle happened! Intraday reversal to the tune of 15-20 bps just like that and closing nicely tighter vs yday. But who cares, both are insolvent and that's the only thing one needs to know. Position yourself accordingly.

Sudden Debt's picture



IQ 145's picture

 I want to go and see the derelict steel mills that are rusting away, and the drunken street prostitutes outside the beer taverns; can this be arranged on a standard tourist junket?

DoChenRollingBearing's picture

For 200 Euros, sure!

Sudden Debt may have friends in low places...

dlsamg's picture

Ben will not let the stock market fall.  99% of people don't know what the heck FX or bonds are. They know the DOW and the Nasdaq. So that's all Ben has to keep pumped up. It's about animal spirits and wealth effect. Bought the dip last night and got out at 1238 and I'm buying this dip. Buy every 10 point dip in the S&P eminis. Ben will reward you.

plocequ1's picture

This is correct. Watching analysts  and economists analyse the fictitious bond market and FX is way beyond my attention level. This is all you need to know. When the market sees red, The fed presses the Ass button and the market goes up. Everything else is fluff.

sheep92's picture

This will be true but only in the end game.  We are not there yet.  At that time gold will really go.  Right now we are still in 'normal' mode where the markets are functional.  If monetization were in full swing gold would not be down nor would EM stocks.  There is huge risk in equities right now.

SheepDog-One's picture

Ben will tank the markets when its time.

sheep92's picture

While Ben has unlimited ammo, he has sort of hamstrung himself with how it is deployed. The politics of the situation are not going to allow for anything more than he has already signed up for until the next 'crisis' hits. Ben played his cards poorly.  Had he done a 'shelf registration' to buy back a trillion in bonds but not really executed he could have drawn out the bond exodus a lot lot longer.  As it is, he may have accelerated the flight from fixed income.  He needed a good trader next to him to help execute his academic strategy.  This could get very ugly very fast.

sschu's picture

... This could get very ugly very fast ...

I tend to agree.  I thought Bennie was going to try to keep rates low and drive the market higher?  The Bernanke Put as it were ....

My guess is he will need a bigger hammer, not sure how big or the method of wielding such a tool, but I can imagine Bennie has some plans.  The Fed will not surrender to the bond vigilantes and PM market without a fight.



DoChenRollingBearing's picture

sschu, I agree.  This seemingly stable market and system we have is actually much more rickety and unstable than it appears.  All we need is ¨an event¨:

-- Israel and/or US attack Iran

-- NKs go at SK

-- China dumps bonds

-- my fat neighbor just dumps

Etc.  Prepare accordingly.

TruthInSunshine's picture

There is a run on Waffle House.

UncleBen's picture

Flanders was downgraded? Hi-dilly ho, Bankrupt-a-reenos...

sheep92's picture

One thing that seems pretty clear is that the bond market is going to keep going down until it does some serious damage to the equity market.  Emerging market equities are the first to feel the brunt. 

Collapsing bond markets usually give rise to events....