European Bloodbath Resumes After Figaro Reports Moody's Eyeing France Downgrade

Tyler Durden's picture

These days the biggest single catalyst to a big gap down is the arrival of 3 am Eastern at which point Europe opens and specifically that one all important instrument, Italian BTPs, start trading. Sure enough, European risk aversion is back, hot on the heels of not only the completely expected Stuporcommittee agreement to disagree and put the US rating at risk, but following a Figaro report that it is now Moody's (as a reminder it was S&P which almost blew up the OAT market one week ago with that "technical glitch") that is contemplating a French downgrade. From Reuters: "Ratings agency Moody's believes the recent rise in interest rates on French government debt and weaker economic growth prospects could be negative for France's credit rating, newspaper Le Figaro on Monday reported the agency as saying. "Presistently high financing costs combined with a deteriorating economic outlook could increase the difficulties that the government faces, with negative implications for credit," the newspaper quoted Moody's as saying. Reuters sought but was unable to obtain confirmation of the reported remarks from the the ratings agency. On Oct. 17, Moody's said it could place France on negative outlook in the next three months if the costs for helping to bail out banks and other euro zone members overstretched its budget." The result: a resumption of the bloodbath. France CDS rise to 11 bps to match record 233. Italy CDS rise 15 bps to 543. Belgium CDS rise 12 bps to 337. The three-month cross-currency basis swap  was 131 basis point below the euro interbank offered rate at 8:45 a.m. in London, the most expensive since December 2008, according to data compiled by Bloomberg. The rate was 130 on Nov. 18. As for cash spreads: they are not at all time records... But they will be shortly, especially since the ECB is largely missing from the market today: telegraphing that it won't monetize? Or is there a hit job on yet another European leader? Which Goldman leader will replace Sarko?

  • France 10-yr yield +6bps to 3.53%; hit 3.61% earlier
    • French spread over bunds +15bps to 165bps; recouping almost half of Friday’s decline
  • Spain 10-yr yield +13bps to 6.5%; hit 6.57% earlier; erasing all of Friday’s decline
    • Spanish spread over bunds +22bps to 463bps; first widening in 3 days though still below Friday’s record 503bps
  • Italy’s 10-yr yield +3bps to 6.68%; hit 6.75% but below the psychological 7% threshold
    • Italian spread over bunds +12bps to 470bps
  • Belgian 10-yr spread over bunds +14bps to 295bps; still below 320bps record last week
  • Austrian 10-yr spread over bunds +7bps to 150bps; below last week's record 192bps

Source: Bloomberg

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BandGap's picture

C'est dommage!

paarsons's picture

The solution?

Ammo, beans, and the Blue Oyster Cult.

Fuck it all in the ass.

What's a boy to do?


Thomas's picture

Rising rates causes credit downgrades causes rising rates. The death spiral begins.

Non-Zero's picture

Looks eerily like 2008 now, of course we know it's now 2008 with 152x leverage...


FTSE 2008 vs. FTSE 2011 here:

The Limerick King's picture



Has French credit worthiness sunk

Or is Moodys just being a punk

With leverage much higher

The truth is more dire

The whole freakin' planet is junk

Josephine29's picture

The essential problem is that there are debt problems everywhere in Europe and France has undercapitalised banks. The problems ensuing from this fact are mounting as is explained well below.



I discussed the impending problem for France on the 11th of November and in a nutshell you can sum up it up as her banking sector. The refinancing and nationalisation of Dexia where France assumed a 36.5% share of the bail out has led to worries about Banque Nationale de Paris, Societe Generale and Credit Agricole. Should they need a bail out too then it will be expensive even for an economy the size of France’s. Today the ratings agency Moodys has added to the issue by stating that elevated borrowing costs would threaten France’s credit rating.


Now there are several issues with Moodys stating the obvious some time after it became obvious to others! But such things can impact on markets more than they should. If we compare the French ten-year bond yield on the 11th of November (3.4%) with today’s of 3.6% we can see that France is edging towards a possible debt crisis.

MFL8240's picture

Another day in the clown show wiith Confetti in the lead.  People are dumping Gold and Silver (real assetts) for junk paper issued by an insolvent country incapable of getting its house in order and we focus on Europe rather than the real problem facing the world.  When this fucking game will end is anyones guess.

qussl3's picture

Technically paper PMs are confetti too.

Mugatu's picture

Now its payback time for the French being such assholes to all those tourists!

Tense INDIAN's picture

Indian rupee is sliding like anything.......nifty down today too...8th day running...worst performing currency in Asia ...and likely o get worse....

westboundnup's picture

Just a quick tidbit.  I was at a function on Sat. evening and found myself seated next to a young guy who I discovered worked for Goldman.  Throughout the evening he drank like a sailor and exhibited behavior that was so obnoxious that I literally began to panic that other attendees would think that we were together.  Easily one of the bigest jerks I have encountered at a social outing. As soon as the function ended, I booked it out of there.  The guy was at the lower rungs of Goldman, but you would think that he would have the smarts to behave properly in public. 

writingsonthewall's picture

He was drinking heavily for a reason.


It's what most condemed men do just before being taken away to the gallows.

mick_richfield's picture

you would think that he would have the smarts to behave properly in public

Well, I doubt that he was stupid -- at least in the dimensions of intelligence that Goldman is aware of.

But it's hard to know exactly how the Big Boss wants them to behave.

And I don't mean the CEO.. I mean Lucifer, the Light Bearer, Son of the Morning, Lord of the Earth.


Canucklehead's picture

Things are unfolding as expected.  No one should worry about a drop in debt rating as there are so many secret side deals and changes to current deals (made on the spur of the moment) that "confidence" will not drop any more than it currently is.  That is to say, confidence is at an all time low.  There is no trust or respect shared by the various parties to the European experiment.

Germany's strategy should be to deal for time so that the other members of the European Experiment can get their houses in order.  Do not expect Germany to commit to backstopping Europe in an absolute way.  If Europe unwinds because the peripherals could not get their house in order, Germany will walk away from the mess and look to reflate their banking system.

Do not be fooled.  A smart person has a number in the back of their mind as to what they can afford.  Germany has laid out a public commitment to provide "X" euros to backstop Europe.  They have an internal number flagged to recapitalize their banking system.  They also have a fudge factor to allow for "overshoot".

If Germany plays for time and does not provide other commitments, pressure builds on Europe to get their house in order.  That is a good thing.

Any commitments from Merkel et al without a referendum from the German people is worthless.  How is that for confidence?

AUD's picture

Or is there a hit job on yet another European leader?

Well, during another serious debt crisis, May 1932, French president Doumer was gunned down at a Rothschild's charity event no less.

DeadFred's picture

Are there any leading Goldman candidates being primped in the wings?

Dapper Dan's picture


What few reported were his dying words:
"But what kind of chauffeur was it?"

He was told he was hit by a car.

max2205's picture

My Senator is buying puts. Fwiw

MFL8240's picture

Moody's downgrade is the cause of the downgrade?  Wren't these same assholes the ones who rated US subprime bonds?  This is a joke and I have to wonder when someone is gonna stand up and say enough of this bullshit, these credit agencies have no credibility.

SmoothCoolSmoke's picture

Been to the cliff before....but we never roll over it.  Is today finally the day?  Tired of waiting for the seemingly inevitable.

BandGap's picture

We ARE over the cliff, it's just a very long fall. 

michaelsmith_9's picture

The debt problems around the world will only get worse as bond yields continue to go higher.  Equities lower, USD higher.  Momentum should continue to increase.  Here is a look at the ES, CL, DX, EURUSD, and AUDUSD.

yogibear's picture

Congrats France you deserve it, your big on socialism.

Dick Darlington's picture

In typical French fashion, living in denial is everything.

 Nov. 21 (Bloomberg) -- France’s financing conditions remain
“favorable” in the face of concern about its credit rating,
Finance Minister Francois Baroin said.
     “The rating agency Moody’s has noted in a weekly bond
market report both favorable elements and ones that increase the
risks to France’s stable rating outlook,” Baroin said in an e-
mailed statement. “At current interest rates, financing
conditions remain very favorable,” he said.
     Baroin said that France is accelerating budget cuts and
plans to eliminate the budget defict by 2016.

slewie the pi-rat's picture

 <=== DSK

 <=== one of the Qadaffy boyz

[your choice to replace sarko the psycho]