Fitch

The rumors yesterday about a Portuguese downgrade ended up being true, courtesy of Fitch. Portugal to Bund spread widens 4 bps to 125bps, all European spreads wider also as a result.Euro dumped and breaks 1.35 support, last seen in mid 1.33 range.

The announcement by Fitch that CMBS delinquencies rose by another 29 bps to a new high of 6.29% is no surprise to anyone who has been following RealPoint's remittance/CMBS reports. Yet it is good to get independent confirmation that there is no respite in CMBS land. And with TALF for existing and new loans expiring on March 31 and June 31 respectively, without ever really taking of, this sector of the market is sure to face increasing pressure, especially when coupled with the certain increase in MBS rates once the last $30 billion or so in QE is purchased. The most recent culprit for deterioration: maturities of 5 year loans from the 2005 vintage as the refi market is still practically dead: "Approximately 30% of the newly delinquent loans were from 2005 transactions. In fact, the four largest newly delinquent loans (ranging in size from $65 million to $112 million) are from this vintage. Three of these four loans are past their 2010 maturity dates and are, therefore, categorized as non-performing matured loans."

And just as Greece was about to launch its 10 year bond offering... Where is Papandreou to claim that Fitch was bought by all the accounts (who may or may not invest in the €5 billion issue) to make the price even better. Because the spread to Bunds just jumped by about 10 bps to 325 following the news. Fitch notes: "The rating actions reflect Fitch's view that the banks' already weakening asset quality and profitability will come under further pressure due to anticipated considerable fiscal adjustments in Greece. In particular, Fitch believes the required fiscal tightening that needs to be made by the Greek government will have a significant effect on the real economy, affecting loan demand and putting additional pressure on asset quality. The latter could result in higher credit costs, ultimately weakening underlying profitability." In the US, where any news is good news, equities jump following the headline.

The rating agency that has gotten selling out down to an art, just downgraded Greece from A1 to A2, yet kept it two notches higher than where the country is now fairly rated by Fitch and S&P, thereby preventing the country from collapsing into a liquidity crisis. By taking this action, Moody's has once again proven its utter worthlessness, by pretending to be objective while at the same time keeping an artificially inflated rating high enough to prevent the unforeseen spillover effects from Greece's inability to use Treasury's as ECB collateral: the definitive first domino to fall in Europa, about which we wrote 3 days ago.

US consumers keeps on purchasing Kindles on credit cards which they apparently have no intention of every paying off. The most recent Fitch report disclosed that October delinquencies have continued their steady climb, and together with charge-offs, are at near record highs: "Consumer credit quality remains under significant strain as a result of the persistent weakness in the labor markets," noted managing director Michael Dean. The Labor Department will report unemployment data Friday; the jobless rate is expected to hold steady at 10.2%, the highest level in decades, while the decline in payrolls is seen mitigating from the previous month.

As we pointed out previously, a Fitch downgrade of Mexico was only a matter of days (S&P - not so much, as the agency is back to its operational sweet spot in the middle of a Fed-enforced bubble). Sure enough, earlier today Fitch dropped Mexico's rating to BBB, citing “The global economic and financial crisis and falling oil
production have accentuated weaknesses in the sovereign’s fiscal
profile. These weaknesses
limit Mexico’s fiscal maneuverability in the face of future oil
income shocks." Yet the hilarious response to this somewhat prudent action came out of scandal-ridden Goldman Sachs, which openly derided Fitch for its action: "We differ from Fitch, because while far from ideal, the 2010 revenue
budget delivered a non-trivial fiscal adjustment amounting to just
under 2.0% of GDP. To be sure, the tax hikes and expenditure cuts could
have been deeper and structurally stronger. However, given the
magnitude of the contraction experienced by Mexico in 2009, few to no
countries adjusted fiscally this year. On the contrary." Subsequent to his report, attached in its entirety, Goldman analyst Paulo Leme continued the Chuck Norris routine: "Everyone else in the
region is experiencing deterioration in the fiscal accounts.
Mexico adjusted. Were the efforts Nobel Prize-winning public
finance? No. But they did a lot."

So there you have it: not only is the NY Fed openly encouraging rating shopping for TALF, but now rating agencies have to be concerned about angering a sleeping octopus, which as we all know, has every right to be morally indignant when others dare to promote an objective reality that may or may not align with Goldman's prop trading interests.

Those leaches stuck to the groin of Wall Street, the rating agencies, may make a repeat appearance, (and, oh no Mr. Geithner, they may have a destabilizing statement - quick, bail out AIG again before it is too late!) when Fitch today downgrades Mexico to BBB. Or so JP Morgan believes. Both Fitch and S&P rate Mexico at BBB+ with a negative outlook "amid concern that declining oil revenue will swell the budget gap." And as the budget was pretty much approved in the same form as expected, Fitch will likely smack our neighbors to the south with a one notch downgrade. JPM also thinks that the intellectual sloths at S&P will merely blink at this data and continue hibernating for another century before they realize their business model went extinct sometime around 2006.

As anyone who has spent even a day looking at securitization tranching or CDS trading will tell you, there are two critical components to any investment that involves risky fixed income: cumulative loss probability and loss severity: the first tells about how likely any given security is to default within a given amount of time, while the second determines what the final recovery will be assuming there is an actual even of default. The two are usually tied in very closely, as any (forced) delays in reaching a default state usually come at the expense of exhausting any underlying asset value (and in some cases being primed by additional layer of debt which get a first look on assets in the case of liquidation).

Fitch has released a comprehensive study on derivatives held by various corporations and has come out with some disturbing results: as Zero Hedge's recent disclosure of data from the Office of the Comptroller of the Currency confirmed, the bulk of the derivative risk is concentrated not merely in the "financial company" category (99.7%) but in a subset of just five companies, which account for an "overwhelming majority" of derivative assets and liabilities.

Nothing to see here... Keep buying stocks.

Following in the footsteps of GE's downgrade earlier, the AAA rated financials are now extinct.

The Fitch downgrade is presented in its entirety, however one important thing to note is Fitch's disclosure that it had evaluated non-public information regarding BRK's derivatives exposure. Being the first to downgrade the company upon seeing this disclosure likely portends nothing too good from the other rating agencies which are behind the curve.

A report by Fitch just out, spreading some more doom and gloom, after the earlier news of a forbearance being sought by the mall operator which is bankrupt in all but name.

GGP RUNNING ON FUMES ON FORBEARANCES; IDR DOWNGRADED TO "RD"

PRU stock getting hammered after Fitch had some choice words for the insurer.

Fitch Ratings-London-12 February 2009: Fitch Ratings has today downgraded Ukraine's Long-term foreign and local currency Issuer Default Ratings to 'B' from 'B+'. This reflects increased risk of a banking and currency crisis in Ukraine, due to intensified stress on the financial system and greater risks to successful implementation of Ukraine's IMF-supported programme. The Outlooks on both IDRs are Negative. The agency has also downgraded the Country Ceiling to 'B' from 'B+'. The Short-term foreign currency IDR is affirmed at 'B'.

Oh no she didn't.

Fitch Ratings-New York-06 February 2009: Fitch Ratings has revised the Rating Outlook on Apollo Investment Corporation's(Apollo) ratings to Negative from Stable as follows:

--Long-term Issuer Default Rating (IDR) 'BBB'; and

--Senior secured debt 'BBB'.