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S&P Warns Of Increased Corporate Bond Downgrade Risk Following Sovereign Action
As we said last week, when the S&P, in desperate hope that the Euro summit would achieve something, anything, to avoid an eventual downgrade of Europe, called Europe's bluff... and Europe was found to hold 2-7 offsuit. Now, when it has no choice but to downgrade the EuropeAAAn-club, S&P is practically apologizing for its action, and is today saying that since nothing happened to change its opinion, it will have no choice but to proceed with pervasive downgrades, only this time not only sovereigns (which it is expected to conclude on shortly) but also corporates of all shapes and sizes. Unless of course it doesn't, at which point the rating agency can just tell the last guy to turn the lights out on their way out.
Bond Downgrade Potential In Emerging And Developed Markets, Including The U.S. And Europe: European Sovereigns Show Increased Downgrade Risk
Standard & Poor's Ratings Services' placement of its ratings on 15 eurozone sovereigns on CreditWatch negative, as well as the rating actions it took on banks, have contributed to an increase in the number of potential bond downgrades. As of Dec. 6, 463 entities were most at risk of downgrades, up from 457 on Nov. 1. Sovereigns and banks continue to show the greatest downgrade risk. The entities in these two sectors are concentrated in Europe, with 25 European sovereigns and 42 European banks on our potential bond downgrades list. Of the issuers that we removed from the potential downgrades list since our last report, 12 are in the banking sector. Seven of the 12 banks were downgraded, most of them in Europe, which reflects ongoing economic concerns in the eurozone.
Potential downgrades are entities that have either negative outlooks or ratings on CreditWatch with negative implications across rating categories 'AAA' to 'B-'. This month, we note the following key points:
- Since our last report, we removed 74 entities from the potential downgrades list, and we added 80. This is more than we added to the potential downgrades list in the last two months combined.
- Of the 463 potential downgrades, 130 are constituents of Standard & Poor's equity-based indices.
- Standard & Poor's Ratings Services downgraded 63 entities that were on the potential downgrades list last month. This is more than the number of entities on the list that were downgraded over the past two months combined. Following the placement of the ratings on 15 eurozone countries on CreditWatch negative, the number of sovereign entities on our potential bond downgrades list increased to 32 from 20 a month ago.
- Sectors showing the greatest downgrade risk compared with their average negative biases are sovereigns and banks. Negative bias is the proportion of issuers with negative outlooks or ratings on CreditWatch with negative implications.
- Of the 80 entities added to the list of potential downgrades, 32 are based in the U.S.
- Of the 66 issuers in the banking sector on the potential downgrades list, 37 (56%) are based in Europe and 15 (23%) are based in the U.S. region, which includes Bermuda and the Cayman Islands.
- By rating, 'B' and 'B+' rated issuers account for the largest proportions of entities with negative outlooks or ratings on CreditWatch negative, with 13% and 11%, respectively. Globally, 52% of the 463 issuers at risk of downgrades are rated speculative grade ('BB+' and lower).
- In our view, 19 of the 21 sectors show lower downgrade risk than they have historically. When we measured the gap between the current negative bias and the historical averages, we found that credit conditions in most sectors are less negative than they have been historically.
Standard & Poor's assigns a negative or positive outlook or places a rating on CreditWatch when it expects the rating may change within two years or less. Standard & Poor's CreditWatch status indicates the potential direction of a credit rating change, dependent on identifiable events and short-term trends, and is typically resolved within 90 days. An outlook indicates the potential direction of a credit rating change over the intermediate to long term, generally within six months to two years. A developing outlook indicates that Standard & Poor's may either raise or lower the rating. A negative outlook or ratings on CreditWatch with negative implications are good leading indicators of actual downgrades. CreditWatch status and outlooks are strong predictors of ratings migration. A research study published by Standard & Poor's corroborates this (see "CreditWatch And Rating Outlooks Provide Powerful Warning Signals," published Aug. 7, 2007, on RatingsDirect). Timely and ongoing surveillance of issuers at risk of downgrades can provide value to investors in their sector credit-allocation process as well as in hedging against potential capital losses arising from a downgrade.
Borrowing costs have risen over the past month as weakening economic conditions have weighed on risky assets. The investment-grade and speculative-grade spreads are both higher than their one-year moving averages and recently reached highs for 2011. Overall negative bias in November was 15.7%, a slight increase from 14.8% in September and a decrease of about 1% from a year ago. Negative bias reached its 10-year high of 36.6% in the second quarter of 2009.
The total number of entities with negative outlooks increased slightly to 395 as of Dec. 6 from 393 in the previous report, while the number of entities with ratings on CreditWatch negative increased to 68 from 64. The ratio of negative outlooks to CreditWatch negative listings decreased to 5.8 to 1 from 6.2 to 1. A decreasing ratio may suggest a shorter time horizon for potential rating actions.
And so forth...
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Didn't somebody just UPGRADE corporate bonds yesterday/this morning.
Peeeerrrrrrrfect timing.
'Less negative'....well at least they got that goin for em.
Take it ALL!
http://www.youtube.com/watch_popup?v=JY8LKII_MNA&feature=youtube_gdata_player
Sarkozy on the possible loss of France's AAA rating in Le Monde today: "It would be one more difficulty but not insurmountable. We would face such a situation coolly and calmly. "
That, my friends, are the words of a leader who has already been passed the black spot by one or more rating agency.
On the Kübler-Ross model, or '5 stages of Grief' this is the final stage.
1) Denial
2) Anger
3) Bargaining
4) Depression
5) Acceptance
And if you've been watching closely then you'd have seen each of those emotions engraved on Sarkozy's face over the last few months.
S&P warns.
That's the new business model.
S&P: We make threats, that's about it.
warn me twice call me a fool warn me three times call me a....
...ain't gonna warn me again.
I Like Turtles
me 2!!!
Hey, risk on.
S&P is getting cocky and coquettish. This ratings report reads like a "roman a clef" Just get on with it, and name the horrible violators.
Downgrades hit this week, with quad witching Friday rapidly approaching. Funny the VIX is down... looks like an opportunity to me.
Agree. Friday after close in Europe, 6 p.m. CET. Then, we will get the downgrades of AA-ustria, FrA+nce, FinnlAAnd, GermAA+ny, and the likes.
Next week, Monday will be fun day in European bond trading.
Go away or I will taunt you a second time!
Anyone know of a working ticker like Nifty? SGXNifty is down about 12 hours of the day, won't load at all today. Relying on it is impossible.
I think this is some new funky mutation of Stockholm Syndrome
is that different than Swedbank syndrome?
blah blah blah. Just fucking man up and do it.
Ratings agencies are tools of the bankstas.
eAa-rth
Downgrades are meaningless at this point. They have little to no effect on the markets.
Which will result in .. you guessed it ... A RALLY!!!
Perhaps they are waiting for the right amount of cash? (or is it gold)...
The market is already pricing these issuers as "super-junkin", so S&P is providing WHAT service here?? They are irrelevant.
To answer the rhetorical question: They are providing letters and numbers to slow, stupid money that sits around waiting to be told they have to liquidate stuff.
AND THERE YOU HAVE IT ... WHY NOT DOWNGRADE ALL OF EUROPE TO JUNK
EUROPEAN COMPANIES PRODUCE GOODS WHICH ARE DESIRED IN THE WORLD. They are PROFITABLE !
WE have TRADE BALANCE SURPLUSS ..The US hasnt got so much of that kind of thing.. except some few companies. THAT COMPETITION has to be thwarted! Let the Europeans pay HIGHER investment costs.. That may help noncompetitive US Companies .. or what _
And then may be conveniently FORGET about the 2.3 TRILLION USD .. Amercian Banks owe to European Banks ..NET ... or the 800 NILLION USD ..UK banks owe to the European Banks ..NET
And What does it matter .. that EUrope has had a POSITIVE TRADING and CURRENCY BALANCE for the Bigger part of its existence... and THUS owes most of its debt to itself ... NOTHING...AS ANGLOSAXONS PORTRAY IT .
BUDDIES ... YOU ARE FAR OUT .. and YOU are playing with FIRE !
The more SHIT coming out of USA mouthes .. the less it will be believed ! And surely ... what is going on NOW .. will NEVER be forgotten by those EUROPEANS ..who can THINK !
If .. i compare the treatment JAPAN recieved from side of the US before the SECOND WORLD WAR ... FORCING JAPAN into the WAR which ensued ... what is attempted by the US ..now ..towards EUROPE ... is of SIMILAR NATURE .
And EUROPE is NOT JAPAN .. we are 500 MILLION PEOPLE .. who PRODUCE more than the US.. And there is RUSSIA , which still has a hell of a lot of BOMBS .. so that card .. which was used by the US against Japan .. Youl have to consider carefully ..it may fall back on US Heads !
NATO... is DEAD ... and the US is finished .... in EUROPE !
THAT will be the end result of THIS
I feel like S&P is the only rating agency that still works in this country. They seem to sometimes have the audacity to tell the truth about the economic collapse that we are in the middle of right now.
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