Moody's Puts Belgium Aa1 Rating Under Downgrade Review, CDS To Surge

Tyler Durden's picture

To all those who bought Belgium CDS as per our compression trade suggested earlier today, congratulations. Oh and the part in the Moody's announcement where it says that a main driver of the review is "The uncertainty around the impact on the already pressured balance sheet of the government of additional bank support measures which are likely to be needed" means that anyone harboring even the smallest hope that France will be within 100 parsecs of Dexia when the broke bank is nationalized, may be slightly disappointed.

From Moodys'

Moody's places Belgium's Aa1 ratings on review for possible downgrade
Frankfurt am Main, October 07, 2011 -- Moody's Investors Service has today placed Belgium's Aa1 local and foreign currency government bond ratings on review for possible downgrade, while affirming its short-term ratings at Prime-1.
The main drivers that prompted the rating review are:
(1) The material increase in long-term funding risks for euro area sovereigns with high levels of public debt, such as Belgium, as a result of the sustained fragility in the wholesale finance environment for euro sovereigns and banks stemming from the sovereign debt crisis.
(2) Risks of a deterioration of the public debt trajectory in light of increasing downside risks to economic growth.
(3) The uncertainty around the impact on the already pressured balance sheet of the government of additional bank support measures which are likely to be needed.
Moody's review will evaluate the weight of these growing risks in light of the country's high rating but also relative to the country's strong credit features such as the economy's net creditor status, high savings rate and the absence of substantial structural imbalances.
First, the fragile market sentiment that continues to surround euro area sovereigns with high levels of debt implies materially increased financing costs and funding risks for sovereigns and banks. Although future policy actions within the euro area could reduce investors' concerns and stabilize funding markets, the opposite cannot be excluded.

Even if policy actions were to succeed in the short term in returning some degree of normality to euro area sovereign debt markets, the underlying fragility is likely to remain and presents elements of vulnerability for euro area sovereigns with high public debt.
Second, the challenges facing the euro area banking system, the need for simultaneous fiscal tightening of euro area sovereigns, together with the weakening global economic growth outlook, pose risks to the growth outlook for the small and very open Belgian economy which, in turn, adds uncertainty regarding the stabilization and reversal of the public debt trajectory.
Third, given the fragility of the funding markets for sovereigns and banks, the likelihood for the need of additional government measures to support individual banks or the system has increased, as illustrated by the significant challenges now facing the Dexia Group. It is unclear how far additional support measures would be likely to weigh on the balance sheet of the government.
Moody's review of Belgium's sovereign ratings will focus on the vulnerabilities of the Belgian public debt in the current euro area sovereign and bank funding environment. This will include a review of potential additional need for government measures to support the banking system, or individual banks. In this regard, Moody's intends to assess the potential costs and additional contingent liabilities that the government may incur in supporting the Dexia Group. During the review period Moody's will also assess how the risks for the growth outlook of the Belgian economy and the government's medium term fiscal and economic plans may impact the country's debt trajectory. Finally, we will also look into the prospects for political stability in Belgium and how the recent agreement on the evolution of the political framework will address the institutional weaknesses which would otherwise have weighed on the rating and allow the incoming government the scope needed to address the country's economic and budgetary challenges.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
GeneMarchbanks's picture

Frenchie too?


DoChenRollingBearing's picture

@ Gene,

Sure, yes, France will be coming soon.  Then the UK and maybe Germany.

Then WE get downgraded again.

Sudden Debt's picture

Don't forget spain with the pastor bank which needs bailout soup to in the near future!

knukles's picture

Another Fucking Universal Truth of Mankind Through the Ages.

Everybody, everywhere and everything under the sun has already been downgraded, in many cases by three or four notches whilst remaining on the "Look Out Below Fire in the Hole" list.
The along comes Belgium which hasn't had a gubamint in Years!  Fucking Years!

And they're downgraded after everybody else with functioning gubamints!


treemagnet's picture

Where did SuddenDebt go?

tmosley's picture

Hopefully out of Europe.

DoChenRollingBearing's picture

+ 1 to tree and t!


But, if so, I will miss his sometimes funny comments on the very belly of the beast called Europe.  But, he has told us that he likes silver, so he will wind up OK.

Sudden Debt's picture

Last year octoberfest got a little bit out of hand, and the misses won't let me go with my friends this year :(

Grounded so to speak....

Sudden Debt's picture

Last year octoberfest got a little bit out of hand, and the misses won't let me go with my friends this year :(

Grounded so to speak....

Sudden Debt's picture

And still buying my friend :)

I had to wait untill october to buy and suddenmy the price dropped bigtime, present from god :)

Next buying time will be january. But i might wait untill march for the next big crash. 20 benny bucks would be a nice newyearresent :)

disabledvet's picture

Beer hall putsch. It's all good!

Praetor's picture

@TM, 100 parsecs from Europe going at Warp 10 like any smart European should.

Ahmeexnal's picture

Seems like France is declaring war on Belgium.
Completely expected.

treemagnet's picture

Old joke,

Did you hear about the mint vintage WWII French rifle for sale on EBay?  Its listed as "Never fired...only dropped once".

Sorry, I just had to.

luckylogger's picture

How much. would like to buy it

FinalCollapse's picture

That's OK - they will split it into good Belgium and bad Belgium, and unicorns will roam the fields again.

oogs66's picture

i'm not so sure i want any part of Bad Belgium, but if they create Naughty Belgium i'm going all in

Fips_OnTheSpot's picture

is fragility a synonym for "brace before shit hits fan"?

PY-129-20's picture

Incoming! Fire in zzze hole! Granate! In Deckung! Take cover!

max2205's picture

Well nice going on Moody's leaking that at 3:30 for the drop or should I say 3:00 so they could run it up for the sheep first.

What a joke this has become

LongSoupLine's picture

Once again ZH is waaaaayyy ahead of the curve.

Ratings agencies are nothing but behind the ball, masters of the obvious.

Sudden Debt's picture

Saint Reggie predicted it months ago. I hope he put some money on it

Poetic injustice's picture

I will post this stolen picture when talking about french war performance:

knukles's picture

Be great to see Snarko's reaction if he saw that... arrogant French dwarf. 
BTW, if he were to ever vacation in Florida again, he could be in the dwarf toss!

S'like Snarko, be slick toss, Yo!

sabra1's picture

that's why the market closed down in the last few seconds! longs beware, there will be no christmas this year!

PY-129-20's picture

No Christmas? Come on! Who stole it? The Blankfein? Again? No Christmas...dammit. And all I wanted was a silver tank.

Mentaliusanything's picture

Zero Hedge Ticks and Flicks another. 

Rated AAA+  



and in case you missed the stuff between the lines


magpie's picture

Garcon, why are there only charred waffles and fries on the menu

virgilcaine's picture

Right I dont see any substantial case for a rally,  Daneric and others have a wave 2 rally to 1250..  Not gonna happen.  Point those wave arrows the other direction

The credit and global macro situation is deteriorating rapidly as described on this esteemed forum by Tyler  .

luckylogger's picture

How do I buy this, do I have to be an institutional invester or is there a public, transparent way to put on this trade on aan exchange??

I would really like to know know how a little 2 bit trader like me can participate ?

Thanks for any reply, this is one part that I cannot figure out how to do without paying a huge bid/ask spread and ;pts pf ,argin.

Thanks for any info that you can give


bbelux's picture

regarding the resluts of dexia after the famous 3 monthes old eu stress test, what should we think about all the banks showing less strong ratios?

MFL8240's picture

When does Moody's crime show evaluate the US banks that are loaded with derivatives and non performaing assets that are on their books at full value (mark to market, US fraud act of 2009)?

bartek's picture

I found this little nugget on Silicon Investor

"Haiti is hell, but so what, at least those people are alive. Millions of people are dying right now in eastern Africa from hunger, millions more are dying from disease in great pain and suffering, millions of children dying like wounded animals, their bones breaking, dehydrated skin coming off, lungs collapsing - they are much worse off than Haitians.

But forget all this and pay attention to what is really important. Survival of Dexia is more important. That is why - in the interest of all of us - all available resources are needed to save Dexia. It is about availability of credit, it is about jobs.
180 billion euro is needed to save Dexia. Let's just work all together on this. And believe me, it will be money well spent."

karmete's picture

Well done! Thank you very much for professional templates and community edition sesli chat sesli sohbet