This page has been archived and commenting is disabled.
Citi Warns Moody's May Put France On Downgrade Review This Friday
One of the more impressive moves in recent months among the universe of European bonds, has undoubtedly been that by French OATs, which have actually outperformed Bunds in recent years, with the OAT-Bund spread the tightest it has ever been...
... even as the French economy has cratered in the past year under its socialist regime, and far from being one of the "core" European economies, is now increasingly considered B-grade at best.
Whether this miraculous performance, in which the market is doing the opposite of what the fundamentals suggest, is due to the ECB-intervention or simply because asset managers have stuck their collective head in the sand of willful ignorance is irrelevant, but according to Citi this latest period of complete disconnect between reality and market may be coming to an end as soon as the Friday when none other than Moody's may put France, and its Aa1 rating, once again on review for a downgrade.
From Citi's Peter Goves:
Downgrade risks have increased for France this week
France has been rated Aa1 with a negative outlook by Moody’s since November 2012. France appears increasingly isolated with its negative outlook given that Moody’s has upgraded several sovereigns this year, revised various outlooks back to stable (Figure 1) and notably, did not revise the outlook back to stable when France last appeared in its calendar on 23rd May. France next appears on Moody’s calendar this Friday (19th Sept). In their latest Credit Opinion (5th August), Moody’s indicated that they would likely downgrade France’s rating if:
- Moody’s confidence in the likelihood of the implementation of the proposed reforms or their effectiveness were to decline,
- Moody’s views on the country's medium- to long-term growth prospects were to deteriorate further,
- Moody’s expectation with respect to the medium-term path of the general government's debt/GDP ratio were to drift towards 100%.
Why we think downgrade risks have increased: Over the course of the last year, economic performance has been disappointing, with zero QoQ GDP growth both in Q1 and Q2. In light of this, Moody’s stated on 18th August that they have “cut 2014 real GDP forecast to 0.5% from 0.6% and our 2015 growth forecast to 0.9% from 1.3%” signalling a further deterioration in their growth outlook. Furthermore, finance minister Sapin recently lowered growth forecasts (2014 to 0.5% from 1%) and raised deficit forecasts (now expecting 4.4% in 2014 and 4.3% in 2015, Figure 2).
Moody’s stated the fact that France will miss its 2014 deficit target was credit negative on 18th August.
Outlook therefore unlikely to be revised back to stable: We believe it is now less likely that Moody’s revises its outlook to stable on Friday. Instead, we believe it is more likely that Moody’s puts France formally on a “review for possible downgrade” with a conclusion probably coming after the budget (due on 1st October).
Of course, all of the above assumes that rating agencies are still relevant in a world where central-planning has made all non-central banker opinion irrelevant; furthermore with the ECB now openly buying up ABS, will even a one notch downgrade in France matter.
At the end of the day, even if Citi is right, it will be all about nationalist pride, one of the few things France has left. And judging by France's hysterical reaction to its first rating agency fall from grAAAce, anything Moody's does, as irrelevant as it may be, will be worth the price of subprime, CCC-rated, and securitized popcorn.
»
- 7083 reads
- Printer-friendly version
- Send to friend
- advertisements -
"Of course, all of the above assumes that rating agencies are still relevant in a world where central-planning has made all non-central banker opinion irrelevant; "
Bingo. It's because it is irrelevant, manipulated, fixed & a Ponzi.
Vanilla Ice rates France A1A.
Listen. Big bad America does not want the "SHIPS OF WAR" to go to Russia.
Your do-lar is going to hit the skids if you "CONTINUE".
France still thinks that money grows on baguettes, butter, and cheese. I was there last summer and almost everyone left work at 4 pm, took a 2 hour lunch break at noon. Must be nice.
Listen. Why is it that when 'mericans travel they never seem to "LEARN" about their destinations culture.
Exceptionalism at it's finest. #1
As France goes, so goes the world.
negative rates;
Right it is US Politics, which = War, Support of War, Oil, Trade, US Dollar.
Marine La Pen's Independence Movement JUST GOT Push Back.
Besides Ireland, UK, Portugal, Greece have worse External Debt to GDP Rate.
http://www.usdebtclock.org/world-debt-clock.html
Bangalore, Rights of Man??? Go fuck yourself.
Listen. Members with a sense of decorum "COUPLED" with a sense of style would craft a comment with equal "POTENCY" but much less vulgarity.
Care to give it a try? I'm counting on you to improve "YOURSELF" starting today!
summer, that's how you keep full employment. With increasing automation there is less meaningful work. Decrease hours worked or put the FSA doing something good instead of enriching the .01% and barely paying off the fsa just enough not to riot. Until you want a pretext for martial law,helped out through the lawlessness on the border and the MS13 gangs currently pouring across the border.
Correct, once again people there is no market for true price discovery. Now eat your OATS.
The Sound of a donkey
http://www.youtube.com/watch?v=nWS4Eu8E2z4 (0:19)
LOL. Yes, goldilocks, that sums it up pretty well. Love your hair, dear.
Sacre bleu!
A higher rate on your bonds means you are closer to default.
These ratings agencies couldn't spot an iceburg to save their lives.
.
Exactly. Fuck Moodys, what does Egan-Jones have to say?
Moody's will never penetrate the Maginot Line
France gets downgraded. Gee, what a shocker. Who could have seen that coming? Does anyone take credit rating agencies seriously anymore? How does the U.S. still have a triple AAA rating, when everyone knows that those 30 year bonds will never get repaid with anything other than hyper-inflated dollars? France and all the other Euros, except maybe Germany and the nordics, should be junk paper....at best.
Moody's is the outfit with The Administration's flak (zandi) ... probably fedgov firing a shot across their bow for some reason or other.
big whoop
Any chance Moody's got a kick in the junk from our masters at .gov? Menstrual boat still going to Russia hrrmm?
S & P has been pretty quiet lately...hmmm
Kris Kross - Jump
http://www.youtube.com/watch?v=010KyIQjkTk (3:17)
Seems that France is involved constructively in the deescalation between Ukraine and Russia...
Our allies in the Euro-Russia (war?); experts in surrender. What could go wrong ?
Stupid
Analyse2:
Agreed. Of all the European nations, I believe that France, despite the contemptible jellyfish Hollande, is the most likely to reassert itself in an adult manner and throw off the yoke of the demented child kings in Vichy DC.
What is your view of Marine Le Pen? I don't yet know enough about her to have any solid opinion. To her credit, she seems to place the interests of France above the interests of the European Union/Commission/Council. Also, unlike Hollande and the detestable weasel Sarkozy, she appears to exhibit signs of being a vertebrate.
Lastly, I see that you discarded the Pink Panther avatar. Please reconsider the Suricate.
Her father is a great and courageous warhorse. But she is kissing the tribe's ass.
I globally share the same views than you on French politicians.
For the avatar : I am trying a new one, but I will reconsider the Suricate -which was rather sympathical ...
Sorry, I shouldn't say "sympathical", but attractive and smiling ;-)
"appears to exhibit signs of being a vertebrate"
the phenomenon of the opposition party politician. you see, it's easier to stick to your principles if you aren't in power
the very moment a politician is in power... reality kicks in
If Marine LePen would become president today, she would have to renege a few key points of her party's manifesto immediately. First the impossible ones, and then those where a strong majority of Frenchmen would protest, and then those that can't be funded, and then those where several foreign partners would not play with, etc. etc.
you are American, aren't you? you usually don't experience that much the phenomenon of a minor party that wins a few local councils/mayors but is never in power at national level, at least not the way France and Italy are used to
----
what are "the interests of the EU/Commission/Council"? Interestingly, the Commission is actually paid to "think and act european", btw.
The Council is a summit of the heads of government of the member countries. Now tell me, if the US would, instead of one president, have a "US Council of State Governors" (with the current US presidential powers), would that council follow a completely different course? Would it be less elected? Would it be smarter, or dumber, or qualitatively different? (My bet is that most people would prefer one to fifty)
France must be trying to click their heels and leave the American Wizard's tyrannical two-step in Oz
Auntie Em's house in Russia is looking warm and inviting
Will this little financial incentive can change their minds?
Hurry Dorathy, the ballon is leaving and you don't need toto.
That'll show'em. The French 10 year 1.43%. Bet the downgrade lowers their yeild. Only in this bizzaro world.
Uncle Warren needs a new bitch
rating agencies are part of the scam of manipulating interest rates on debt. that is all.
What? No recovery?
Yes, because who better to trust than the "pristine" opinion of Moodys. WHAT A JOKE
lol, Maybe Hollande can do some "Rope-A-Dope" with Greek paper? They just got upgraded to BBB from BBB-.
Who's winning this game of "sovereign charades" anyways? I can't keep up...
I give it 30 days and Russia will be on their orders .
why aren't these isis guys smuggling wti??? the u.s needs to get its "distillates" out into the global market some how? the u.s is "smuggling" coal to europe, why not use isis to smuggle wti to europre?
snarky sarc
This is the fascist/Nazis in DC welding their financial sword.
Moodys you gutless spineless losers.
Only Weiss Research follows and tags The Bloated Ones honestly and timely.