"The Waterfall Of Reality": A Visual History Of Cyprus' Credit Rating

Tyler Durden's picture


It was May in 2010 that Greece suffered its first bailout by its Eurozone peers. At that moment it effectively went bankrupt, however it took nearly three years for reality to set in. Yet it wasn't until months later that Greece's smaller (as we are constantly reminded) neighbor was first downgraded from its legacy "pristine" status, by the jokes that are the "Big 3" credit rating agencies. That downgrade unleashed an "waterfall of reality", shown exquisitely on the chart below culminating with yesterday's S&P cut of the island nation to CCC from CCC+, which is only comparable to the boom to bust ratings of CDS issued in early 2007 only to see full loss a few months later. How long until one or more agencies push the country to the dreaded "D" line?

Source: Bloomberg Brief

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Fri, 03/22/2013 - 08:08 | 3361358 killallthefiat
killallthefiat's picture

And to think that these had an A rating in 2012.  Who would've guessed

Fri, 03/22/2013 - 08:13 | 3361359 bigwavedave
bigwavedave's picture

Im with Fitch. Definitely a B

Fri, 03/22/2013 - 08:57 | 3361489 idea_hamster
idea_hamster's picture


Don't forget that Fitch is a French operation and the French banks have some of the most extensive exposure to Greece -- and likely Cyprus as well.  

After all once you find a banker who is equally fluent in French, Greek, and Fraud, you want that guy to max it out!

Fri, 03/22/2013 - 09:02 | 3361504 aint no fortuna...
aint no fortunate son's picture

not to pick nits, but instead of boom to bust 2007 CDS, did the Tylers mean CDO? Just sayin...

btw, Larry Motherfucking FINK has Cyprus at BBB+

Fri, 03/22/2013 - 09:26 | 3361588 Joe Davola
Joe Davola's picture

Can't wait 'til they hit the DD line.

Fri, 03/22/2013 - 08:19 | 3361368 Motorhead
Motorhead's picture

I'm sure Simon Black was all over it.

Fri, 03/22/2013 - 08:42 | 3361439 Sudden Debt
Sudden Debt's picture


based on the no child left behind programm in the US that is sooooo succesfull....

Fri, 03/22/2013 - 08:58 | 3361491 machineh
machineh's picture

Add two years to the dates on the x-axis, and change the title from 'Cyprus' to 'France.'

OOPS ...

Fri, 03/22/2013 - 13:28 | 3362794 flyingpigg
flyingpigg's picture

Well, if you believe that will happen this is the time to short OAT's. Ten-year yield is just above 2 pct for France! French sovereighn debt is stil priced at a small spread over Bunds so I guess it's still ocnsidered part of the core in Europe...



Fri, 03/22/2013 - 09:14 | 3361550 TruthHunter
TruthHunter's picture

Non investment Grade?  

CCC   "In default with little
prospect for recovery"

Is that wallpaper grade or toilet paper grade?

Fri, 03/22/2013 - 08:13 | 3361361 Rainman
Rainman's picture

I'll wager some insolvent pension fund somewhere in California is buying that fuckin dip .

Fri, 03/22/2013 - 12:47 | 3362623 Diogenes
Diogenes's picture

They've got to keep their return over 8% somehow.

Fri, 03/22/2013 - 08:27 | 3361390 babylon15
babylon15's picture

Does this really even matter?  Does credit rating accurately predict anything anymore?  In 2008 everything was AAA and still went bust.

Fri, 03/22/2013 - 08:32 | 3361408 Cursive
Cursive's picture


Well, no, the ratings agencies don't matter in reality, but they do matter in the phony world of finance.  Think of the post like a Holocost Museum since there's like one in every major city now.  It's there to remind us.

Fri, 03/22/2013 - 08:42 | 3361440 Urban Redneck
Urban Redneck's picture

They only matter as a proxy for the existence of a counter-party.  As long as accounting and collateral standards can be suspended at will the actual rating is irrelevant, as long as there is someone (ECB, FED) willing to do business with the holder of the paper.  When that music stops it's Lehman Redux time...

Fri, 03/22/2013 - 10:45 | 3362005 Day_Of_The_Tentacle
Day_Of_The_Tentacle's picture

I may be wrong, but as I understand it, they matter in the way that everytime a country is downgraded, the borrowing cost will increase, and the valuation that existing assets can be booked at will decrease, which means that they must look for more capital to stay solvent. At some point no moe capital can be found and the jig is up.

Given the irrational application and timing of ratings from these entities, one can only assume that the rating agencies are in fact financial hitmen to be used whereever and whenever convient and their weapons are basically financial weapons of sovereign destruction.

Fri, 03/22/2013 - 11:53 | 3362350 Urban Redneck
Urban Redneck's picture

On a long enough timeline... sure.  However, look at US and Italian prices post downgrade, they have ways of mitigating that impact.  But since the entire ponzi industry is insolvent, the agencies can serve as effective hitmen when an institution (or State) needs to be brought down or brought into line.

Fri, 03/22/2013 - 10:23 | 3361885 zenmeister
zenmeister's picture

You do realise that Credit Ratings are _trailing_ indicators...

Fri, 03/22/2013 - 08:40 | 3361431 toys for tits
toys for tits's picture

Their credit has gone down faster than someone who got hooked on heroin.

Fri, 03/22/2013 - 08:46 | 3361451 eclectic syncretist
eclectic syncretist's picture

No printing presses for you, bitchez!

Fri, 03/22/2013 - 08:52 | 3361470 optionsman
optionsman's picture

credit ratings. what a joke. but has anyone ever shed light on the kind of credit work that is done across the buy side? why is there a bid for bonds of entities that are likely to be in deep trouble? has any one shown how a credit transitions from an investment grade index to a non-investment grade index? when that happens one fund may sell the bonds (as they may not be able to hold the non-IG bonds) and another fund (perhaps even within the same company) will buy the bonds because they are now HY. so who benefits from all this trading? that's right, the buy side. in the mean time those IG fund managers who make an "active" decision not to sell the non-IG bonds clearly bet on the bid from HY funds to save their hides. however and when they report their results to investors they label the outperformance from such decisions as security selection ;) while it is clearly a sector allocation decision. oh what fun.........

Fri, 03/22/2013 - 08:55 | 3361479 Herkimer Jerkimer
Herkimer Jerkimer's picture





Could we see these charts for the rest of the big banks in the rest of the EU countries?



Fri, 03/22/2013 - 09:00 | 3361502 silentlurker
silentlurker's picture

I think Obama will give Cyprus a solid B+

Fri, 03/22/2013 - 23:17 | 3364893 Joseph Jones
Joseph Jones's picture

Let Obama declare we have an "unbreakable bond" with, an "everlasting" relationship of support with Cypress. 

Oh, sorry, my bad.  As per the first and last commandment of God and enshrined in the Constitution, such relationships are reserved only for jewland, because, you know, jews have permanent "victim" status on earth, and jews are god's chosenites.  

Fri, 03/22/2013 - 09:40 | 3361586 shinobi-7
shinobi-7's picture

The salaries of the analysts at S&P should be paid with the currencies (and bonds) they grade. Ratings would be far more up to date and realistic!

Fri, 03/22/2013 - 09:36 | 3361624 IamtheREALmario
IamtheREALmario's picture

Chicken or Egg. Did the deterioration of the banks cause the credit ratings to fall or did the deterioration of the credit rating cause the crisis.

We know for a fact, based on the CDO crisis that the ratings agencies collude with the banks because the banks pay them money (oddly enough these agencies are still in business and have a monopoly). How big of a stretch is it to assume that this is just another example of bank and ratings agency collusion designed to create a specific outcome.

In other words, the whole situation may be an actual conspiracy designed to come to just this outcome.

Fri, 03/22/2013 - 15:12 | 3363276 earleflorida
earleflorida's picture

just a trial balloon, period! they could give a fuck where the chips fall.

objective:  enhance the, 'trailing learning curve' for two`morrow's flight path on the mainland!?

Fri, 03/22/2013 - 16:15 | 3363587 daveO
daveO's picture

The way these news items come out of the blue, it surely looks like a 'hit', to keep the biggest boys afloat.

Fri, 03/22/2013 - 09:42 | 3361654 Grimbert
Grimbert's picture

Can anyone tell me where I can see a sequential list of these ratings and what they mean, maybe with pictures like a tree swaying, a man struggling to walk, slates flying off a roof or Dorothy's house?


In fact that might be an idea for WilliamBanzai7 - the Beaufort scale of credit ratings


Fri, 03/22/2013 - 10:05 | 3361786 High4Life
High4Life's picture

I wonder if any CDS have been triggered.  This should be qualified as a credit event right?   Jamie Dimon are you there?  Anyone from JP Morgan to answer the question?

Fri, 03/22/2013 - 10:22 | 3361879 orangegeek
orangegeek's picture

Credit rating agencies do a great job.  We all knew about Worldcom, Enron and all those fucking banks well before it happened.


Excuse me while I go puke.

Fri, 03/22/2013 - 15:21 | 3363314 Shizzmoney
Shizzmoney's picture

What's the worst rating? ZZZ-?

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