Asked whether he would repeat an assurance he gave in late 2012 that Greece wouldn’t default, Wolfgang Schäuble told The Wall Street Journal and French daily Les Echos that “I would have to think very hard before repeating this in the current situation.” To which Moody’s had just one thing to add: “there is a high likelihood of an imposition of capital controls and a deposit freeze.”
– The Gloves Come Off: Moody’s Warns Of Greek “Deposit Freeze” As Schauble “Won’t Rule Out Default” (ZeroHedge, May 20, 2015):
Ever since Syriza took over the Greek government and has refused, at least until now, to concede to every Troika demand of perpetuating a status quo which it was elected with a mandate to overturn, Europe has done everything in its power to make not only Syriza’s life increasingly difficult and hostile, but has taken every opportunity to turn the Greek population against its rulers, in hopes that a more “moderate”, technocrat government would replace the “radical leftists.” So far it has failed, despite the best attempts by the ECB and the European Commission to sput a terminal bank run. Continue reading »
– Moody’s “Junks” Russia, Expects Deep Recession In 2015 (ZeroHedge, Feb 20, 2015):
Having put Russia on review in mid-January, Moody’s has decided (somewhat unsurprisingly) to downgrade Russia’s sovereign debt rating to Ba1 (from Baa3) with continuing negative outlook. The reasons:
- *MOODY’S SAYS RUSSIA EXPECTED TO HAVE DEEP RECESSION IN ’15, CONTINUED CONTRACTION IN ’16
- *MOODY’S SEE RUSSIA DEBT METRICS LIKELY DETERIORATING COMING YRS
We assume the low external debt, considerable reserves, lack of exposure to US Treasuries, and major gold backing were not considered useful? Moody’s concludes the full statement (below) by noting that they are unlikely to raise Russian sovereign debt rating in the near-term.
* * *
Kind of ironic then that Russia is the best performing stock market in the world this year!!
* * *
Full Moody’s Statement: Continue reading »
– US Pension Plans Need Massive $110 Billion In 7 Years, Moodys Warns (ZeroHedge, Nov 6, 2014):
Thanks to improving life expectancy and the Federal Reserve’s financial repression lowering yields, US company pension funds have been hit by a double whammy. As Moody’s warns, companies will have to find $110 billion in the next seven years to fund pension liabilities shortfalls. Moody’s adds, “given these increasing liabilities and cash drains, we expect to see an acceleration in lump sum offers,” as firms try to derisk.
– Public Pension Funds Face $2 Trillion Shortfall, Moodys Warns (ZeroHedge, Sep 26, 2014):
“Despite the robust investment returns since 2004, annual growth in unfunded pension liabilities has outstripped these returns,” Moody’s warns in its latest report on the state of public pension systems. As Bloomberg reports, the 25 biggest systems by assets averaged a 7.45% return from 2004 to 2013, but liabilities tripled over the same period leaving them facing a $2 trillion shortfall as investment returns can’t keep up with ballooning obligations. The top 25 funds account for 40% of the entire US public pension system with Illinois, Kentucky, Connecticut, and Louisiana at the top of the ‘most underfunded’ list.
– Moody’s downgrades Ukraine to ‘default imminent’ (RT, April 5, 2014):
Moody’s Investors Service has downgraded Ukraine’s government bond rating one notch from Caa2 to Caa3, citing the current political crisis and deepening economic instability as reasons for its negative outlook.
The Caa rating is a credit risk grading pertaining to investments that are both very poor quality and entail a high credit risk. The current downgrade drops Ukraine from Moody’s “extremely speculative” rating to “default imminent with little prospect for recovery.”
Moody’s said the downgrade was driven by three factors, which “exacerbate Ukraine’s more longstanding economic and fiscal fragility.”
– Moody’s Puts Russia On Downgrade Review; Cites Event Risk, Investor Sentiment, And Weakening Economy (Zerohedge, March 28, 2014):
Hot on the heels of what S&P said was not a “politically motivated” shift to rating watch, Moody’s (who did not downgrade the USA and are not currently in a lawsuit over such terrible misrepresentations) has decided now is the time to put Russia on rating downgrade watch. The decision was triggered by 3 key factors: the weakening of Russia’s economic strength, potential shifts in investor sentiment, and susceptibility to event risk.
Full report below… Continue reading »
– Municipal Bankruptcy? Why Not! And so The Floodgates Open (Testosterone Pit, Nov 16, 2013):
Today and Monday, individual investors have a unique opportunity to “benefit” from the greatest bond bubble in history, even before institutional investors get to jump in, and buy sewer bonds – yup, that’s where they belong – issued by a county that landed in bankruptcy court because it defaulted on its prior sewer bonds. The money will go to the existing bondholders who’ll get a fashionable haircut as part of the deal – a deal made in bond-bubble heaven.
Jefferson County, which includes Alabama’s largest city, Birmingham, filed for Chapter 9 bankruptcy protection in 2011 when it defaulted on $3.1 billion in sewer bonds. At the time, it was the largest municipal bankruptcy. That record was crushed when Detroit filed in July.
– Moody’s Retaliates At Hong Kong For Snowden Insubordination (ZeroHedge, June 24, 2013):
Uncle Warren appears unhappy with the humiliating can of whoop-ass Hong Kong unleashed on his favorite crony banana republic. So he has retaliated in the only way he knows: Moody’s.
- HONG KONG BANKING SYSTEM OUTLOOK REVISED TO NEGATIVE BY MOODY’S
- MOODY’S CITES CONCERNS ON PERSISTENT NEG REAL INTEREST RATES
- MOODY’S CITES POTENTIAL HK ‘PROPERTY BUBBLES’ – this one is really good.
But the best reason is:
- MOODY’S CITES HK BANKS’ GROWING EXPOSURES TO MAINLAND CHINA
Yup. Moody’s just figured out Hong Kong has exposure to… China. Of course, Hong Kong’s downgrade of US foreign policy to laughably pathetic, outlook hilarious on Sunday, was a complete coincidence.
– S&P Downgrades Berkshire From AA+ To AA, Outlook Negative (ZeroHedge, May 16, 2013):
Obviously with Buffett a major shareholder of Moody’s, the only place where a downgrade of Berkshire could come from was S&P. Moments ago, the rating agency that dared to downgrade the US for which it is being targeted by Eric Holder’s Department of “Justice”, did just that. Continue reading »
– Moody’s: Cyprus Euro Exit Risk Substantial (ZeroHedge, March 27, 2013):
Though it may seem a little like stating the obvious to many, Moody’s comments:
While the risk of a euro exit by Cyprus is substantial… …following the economic dislocation that will be caused by the restructuring of the island’s two largest banks and the imposition of capital controls in the country, it is possible that the risk of euro exit will increase further.
And so while the talking heads discuss Cyprus as a unique situation and too small to care about, it seems the reality of the last two weeks has actually raised their chance of Euro exit as opposed to bailed them into the Euro.
Moody’s lowers Cyprus’s country ceilings to Caa2
– Farewell AAA: Moody’s Downgrades The UK From AAA To Aa1 (ZeroHedge, Feb 22, 2013):
Just the headline for now:
- MOODY’S DOWNGRADES UK’S GOVERNMENT BOND RATING TO Aa1 FROM AAA
Someone must have clued Moody’s on the fact that the UK is about to have its very own Goldman banker, which means consolidated debt/GDP will soon need four digits. In other news, every lawyer in the UK is now celebrating because come Monday Moody’s will be sued to smithereens.
Cable not happy as it tests 31 month lows…
Full report below: Continue reading »
– As Euro Banks Return €137 Billion In Cash, Moody’s Warns “European Banks Need More Cash” (ZeroHedge, Jan 25, 2013):
Europe has now officially become the Schrodinger continent, demanding both sides of the economic coin so to speak, and is stuck between the proverbial rock and hard place (or “a cake and eating it”). On one hand it wants to telegraph its financial system is getting stronger, and doesn’t need trillions in implicit and explicit ECB backstops, on the other it needs a liquidity buffer against an economy that, especially in the periphary, is rapidly deteriorating (Spanish bad debt just hit a new all time high while Italian bad loans rose by 16.7% in one year as more and more assets become impaired). On one hand it wants a strong currency to avoid any doubt that there is redenomination risk, on the other it desperately needs a weak currency to spur exports out of the Eurozone (as Spain showed when the EUR plunged in 2012, however that weak currency is now a distant memory and it is now seriously weighing on exports). On the one hand Europe wants to show its banks have solidarity with one another and will support each other, on the other those banks that are in a stronger position can’t wait to shed the stigma of being associated with the weak banks (in this case by accepting LTRO bailouts).
It is the latest that is the most glaring dichotomy because as reported earlier, while some 278 banks, or about half of the original LTRO participants, voluntarily paid back some €137 billion to the ECB, it is none other than Moody’s warning that European banks, especially those in the periphery, will need much more cash. Continue reading »
– Moody’s Warns On USAAA Rating; IMF Piles On (ZeroHedge, Jan 2, 2012):
Moody’s has stepped forward with the first warning shot across the bow that:
- *MOODY’S: MORE MEDIUM TERM ACTIONS MAY BE NEEDED TO SUPPORT Aaa
Has contradicted itself (from September) on the debt-ceiling breach; and warns that while the deal ‘mitigates’ some fiscal drag, it does not remove it. To wit: the IMF piles on:
- *IMF SAYS `MORE REMAINS TO BE DONE’ ON U.S. PUBLIC FINANCES
- *IMF SAYS U.S. DEBT CEILING SHOULD BE RAISED `EXPEDITIOUSLY’
Full statements below. Continue reading »
– One Less In The AAA Club: Moody’s Downgrades FrAAnce From AAA To Aa1 – Full Text (ZeroHedge, Nov 19, 2012):
After hours shots fired, with Moody’s hitting the long overdue one notch gong on France:
- MOODY’S DOWNGRADES FRANCE’S GOVT BOND RATING TO Aa1 FROM Aaa
- FRANCE MAINTAINS NEGATIVE OUTLOOK BY MOODY’S
Euro tumbling. In other news, UK: AAA/Aaa; France: AA+/Aa1… Let the flame wars begin
From the release:
Moody’s decision to downgrade France’s rating and maintain the negative outlook reflects the following key interrelated factors: Continue reading »
– ADP “Cancels” 365,000 Private Jobs Created In 2012 (ZeroHedge, Oct 31, 2012):
Frequent readers know that in addition of any “data” and “numbers” out of Larry Yun’s National Association of Realtors, which we openly boycott as these are consistently manipulated (recall the massive historical December 2011 revision), slanted and conflicted, the second dataset which we have mocked with a passion is anything coming out of the ADP, which every month releases its “Private Jobs” number a day before the official BLS Non-farm Payroll data. Today, our mockeries have been proven 100% spot on. The reason? A week ago, ADP announced that going forward it would coordinate with Moody’s (yes, that Moody’s), and especially its chief economist, SecTres hopeful (InTrade odds of actually attain that post: 0.00) Mark Zandi, to fudge adjust its data going forward. The data revision was supposed to be publicly disclosed tomorrow when the official October ADP number was released. Well, just like today’s Chicago PMI, and so many other data points recently, this too was released early. What the early release allowed us to promptly calculate is that using the historically revised numbers, and comparing those based on the original methodology, in 2012 alone, the US would have lost a whopping… 365,000 private jobs! Putting thus number in context, according to the revised methodology, the US has generated only 1.172MM jobs in 2012 through September, or in other words, a statistical “fix” magically eliminated over 30% of what the market had previously expected were job gains, a number which the incumbent president has certain taken advantage of on more than one occasions while campaigning.The chart below shows the old data series (which can still be found at the St. Louis Fed), and the new series, which can be extracted from the advance leaked press release. The cumulative difference is the black line. It needs no explanation.
What is also of note, is that had ADP used its revised methodology, it would have missed 5 out of the past 7 Wall Street consensus estimates.
As an added bonus, whereas according to the previous release, which we were lucky enough to tag here, the US generated +4,000 manufacturing jobs in September, the new release indicates that in the same month, the US actually lost -17,400 manufacturing jobs. Perhaps it is time to rerun the Ohio presidential speeches one more time…
And that is how “precise” supposedly the far more accurate ADP (at least in comparison to the NFP’s wild X-12-ARIMA extrapolated goalseeked data) was historically. Continue reading »
– Moody’s Warns Of 1 Notch Downgrade If A Bitterly Divided Congress Does Not Begin To Cooperate (ZeroHedge, Sep 11, 2012):
13 months ago, in the aftermath of the debt ceiling fiasco, which we now know was a last minute compromise achieved almost entirely thanks to the market plunging to 2011 lows, S&P had the guts to downgrade the US. Moody’s did not. Now, it is Moody’s turn to fire up the threat cannon with a release in which it says that should the inevitable come to pass, i.e. should congressional negotiations not “lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term” then “Moody’s would expect to lower the rating, probably to Aa1” or a one notch cut. Moody’s also warns that should a repeat of last year’s debt ceiling fiasco occur, it will also most likely cut the US. Of course, that the US/GDP has risen by about 8% since the last August fiasco has now been apparently forgotten by both S&P and Moodys. Sadly, continued deterioration in the US credit profile is inevitable, as every single aspect of modern day lives that is “better than its was 4 years ago” has been borrowed from the future. More importantly, with the S&P at multi year highs courtesy of Bernanke using monetary policy to replace the need for fiscal policy, Congress will see no need to act, and Moody’s warning will be completely ignored. This will continue until it no longer can.From Moody’s:
Budget negotiations during the 2013 Congressional legislative session will likely determine the direction of the US government’s Aaa rating and negative outlook, says Moody’s Investors Service in the report “Update of the Outlook for the US Government Debt Rating.”
If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable, says Moody’s.
If those negotiations fail to produce such policies, however, Moody’s would expect to lower the rating, probably to Aa1.
– Moody’s Says U.S. Faces Aaa Cut Without Budget Deal in 2013 (Bloomberg, Sep 11, 2012):
Moody’s Investors Service said it may join Standard & Poor’s in downgrading the U.S.’s credit rating unless Congress next year reduces the percentage of debt- to-gross-domestic-product during budget negotiations.
The U.S. economy will probably tip into recession next year if lawmakers and President Barack Obama can’t break an impasse over the federal budget and if George W. Bush-era tax cuts expire in what’s become known as the “fiscal cliff,” according to a report by the nonpartisan Congressional Budget Office published on Aug. 22. The rating would likely be cut to Aa1 from Aaa if an agreement on the debt ratio isn’t reached, Moody’s said in a statement today.
Moody’s downgraded nearly 300 U.S. municipal issuers in the second quarter, the most for any quarter in more than a decade and the latest sign of the potential pressure building in the market where states and local governments raise money.
Local areas across the U.S. have been struggling for several years after the recession sharply undercut revenues, with three cities in California recently filing for bankruptcy in an attempt to alleviate their financial burdens.
Tax receipts have rebounded but not enough to compensate for rising costs, which include healthcare spending, social welfare and labor. Continue reading »
– UK economic outlook slumps on eurozone crisis (Guardian, July 31, 2012):
UK may lose triple-A rating if GDP growth continues to disappoint, Moody’s ratings agency warns
The UK’s economic outlook has weakened as a result of the eurozone debt crisis, Moody’s has said in a fresh blow to the chancellor George Osborne.
The ratings agency cut its forecasts for GDP growth, after figures last week showed the UK economy shrank by 0.7% in the second quarter – far more than expected.
Moody’s expects GDP to grow by just 0.4% this year and 1.8% in 2013, which is considerably more optimistic than many economists, who expect the economy to contract this year. Gerard Lyons at Standard Chartered said after the GDP figures were published: “I think it’s inconceivable that there will be positive growth this year.”
Moody’s warned on Tuesday that Britain could lose its triple-A rating if economic growth did not meet expectations, and if the country’s debt burden increased. It said the weaker economic environment could challenge the government’s efforts to reduce debt in the coming years.
– Moody’s Changes Aaa-Rated Germany, Netherlands, Luxembourg Outlook To Negative (ZeroHedge, July 23, 2012):
In a first for Moody’s, the rating agency, traditionally about a month after Egan Jones (whose rationale and burdensharing text was virtually copied by Moody’s: here and here), has decided to cut Europe’s untouchable core, while still at Aaa, to Outlook negative, in the process implicitly downgrading Germany, Netherlands and Luxembourg, and putting them in line with Austria and France which have been on a negative outlook since February 13, 2012.The only good news goes to Finland, whose outlook is kept at stable for one simple reason: the country’s attempts to collateralize its European bailout exposure, a move which will now be copied by all the suddenly more precarious core European countries.
From the report:
Moody’s changes the outlook to negative on Germany, Netherlands, Luxembourg and affirms Finland’s Aaa stable rating
London, 23 July 2012 — Moody’s Investors Service has today revised to negative from stable the outlooks on the Aaa sovereign ratings of Germany, the Netherlands and Luxembourg. In addition, Moody’s has also affirmed Finland’s Aaa rating and stable outlook.
All four sovereigns are adversely affected by the following two euro-area-wide developments:
1.) The rising uncertainty regarding the outcome of the euro area debt crisis given the current policy framework, and the increased susceptibility to event risk stemming from the increased likelihood of Greece’s exit from the euro area, including the broader impact that such an event would have on euro area members, particularly Spain and Italy.
2.) Even if such an event is avoided, there is an increasing likelihood that greater collective support for other euro area sovereigns, most notably Spain and Italy, will be required. Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form.
– Moody’s Downgrades Italy’s To Baa2 From A3, Negative Outlook – Full Text (ZeroHedge, July 12, 2012):
Just like Spain before everyone took the country to a Sub-A rating, Fitch is once again the decider. S&P has Italy at BBB+, and Now Moody’s just took italy under A to Baa2; only Fitch is still at A-, outlook negative. When all three rating agencies go sub A, there is a 5% ECB repo hike as we explained back in April.
Frankfurt am Main, July 13, 2012 — Moody’s Investors Service has today downgraded Italy’s government bond rating to Baa2 from A3. The outlook remains negative. Italy’s Prime-2 short-term rating has not changed.
The decision to downgrade Italy’s rating reflects the following key factors: Continue reading »
– Moody’s cuts ratings of 28 Spanish banks (RT, June 25, 2012):
Ratings agency Moody’s has cut the ratings of 28 Spanish banks following a June 13 downgrade of Spain’s sovereign rating by three notches.
The banks’ long-term debt and deposit ratings have been downgraded by one to four notches. The rating of Bankia, one the country’s largest banks, has been cut to junk status.
– Moody’s Downgrades Spanish Banking Sector By 1-4 Notches (ZeroHedge, June 25, 2012):
The long anticipated downgrade of the recently bailed out Spanish banking sector has arrived. Moody’s just brought the hammer down on 28 Spanish banks. Also apparently in Spain banks are now more stable than the country: “The ratings of both Banco Santander and Santander Consumer Finance are one notch higher than the sovereign’s rating, due to the high degree of geographical diversification of their balance sheet and income sources, and a manageable level of direct exposure to Spanish sovereign debt relative to their Tier 1 capital, including under stress scenarios. All the rest of the affected banks’ standalone ratings are now at or below Spain’s Baa3 rating.” Can Spain borrow from Santander then? They don’t need the ECB.
– Moody’s To Junk Spanish Banking System In Hours (ZeroHedge, June 25, 2012):
Nearly two weeks ago we penned “These Three Spanish Banks Will Be Downgraded Tomorrow” which showed which banks had a rating higher than the sovereign following Moody’s long overdue Spanish downgrade, and thus were about to be downgraded by many notches. Today, after a ridiculously long delay whose only purpose was to buy time, Moody’s is about to junk virtually the entire Spanish banking sector, as was widely expected.The downgrade is expected to happen within hours.
After cutting the rating of Baa3 and Spain to threaten to put Spanish debt at the level of junk bond no later than 30 days, has reviewed the notes of all banks. “We have reported a reduction of two or three notches (steps) to almost everyone. Do not look at individual financial statements of each entity. Do not discriminate, “added the sources.
– Here We Go: Moody’s Downgrade Is Out – Morgan Stanley Cut Only 2 Notches, To Face $6.8 Billion In Collateral Calls (ZeroHedge, June 21, 2012):
Here it comes:
- MOODY’S CUTS 4 FIRMS BY 1 NOTCH
- MOODY’S CUTS 10 FIRMS’ RATINGS BY 2 NOTCHES
- MOODY’S CUTS 1 FIRM BY 3 NOTCHES
- MORGAN STANLEY L-T SR DEBT CUT TO Baa1 FROM A2 BY MOODY’S
- MOODY’S CUTS MORGAN STANLEY 2 LEVELS, HAD SEEN UP TO 3
- MORGAN STANLEY OUTLOOK NEGATIVE BY MOODY’S
- MORGAN STANLEY S-T RATING CUT TO P-2 FROM P-1 BY MOODY’S
But the kicker:
ONLY MORGAN STANLEY, HSBC CUT LESS THAN MOODY’S ORGINAL MAXIMUM.
And there you have it – the reason for the delay were last minute negotiations, most certainly involving extensive monetary explanations, by Morgan Stanley’s Gorman (potentially with Moody’s investor Warren Buffett on the call) to get only a two notch downgrade. And Wall Street wins again.
Recall, from MS’ 10-Q:
“In connection with certain OTC trading agreements and certain other agreements associated with the Institutional Securities business segment, the Company may be required to provide additional collateral or immediately settle any outstanding liability balances with certain counterparties in the event of a credit rating downgrade. At March 31, 2012, the following are the amounts of additional collateral, termination payments or other contractual amounts (whether in a net asset or liability position) that could be called by counterparties under the terms of such agreements in the event of a downgrade of the Company’s long-term credit rating under various scenarios: $868 million (A3 Moody’s/A- S&P); $5,177 million (Baa1 Moody’s/ BBB+ S&P); and $7,206 million (Baa2 Moody’s/BBB S&P). Also, the Company is required to pledge additional collateral to certain exchanges and clearing organizations in the event of a credit rating downgrade. At March 31, 2012, the increased collateral requirement at certain exchanges and clearing organizations under various scenarios was $160 million (A3 Moody’s/A- S&P); $1,600 million (Baa1 Moody’s/ BBB+ S&P); and $2,400 million (Baa2 Moody’s/BBB S&P).”
So instead of $9.6 billion, MS will face only $6.8 billion in collateral calls.
Still the firm is not out of the woods: Continue reading »
Tags: Bank of America, Banking, Barclays, BNP Paribas, Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Economy, Global News, Goldman Sachs, HSBC, JPMorgan, Moody's, Morgan Stanley, Nomura, Rating, RBS, Societe Generale, Warren Buffett
– Big Bank Downgrade By Moody’s Imminent (ZeroHedge, June 21, 2012):
Even as Moody is now about a week late on its Spanish bank downgrade where the banks are rated higher than the sovereign (which obviously is kept in check to prevent yields on bonds from soaring even more), here comes the next wholesale bank downgrade:
- Moody’s expected to announce ratings downgrade for UK banks this evening – Sky Sources
- Exclusive: Big news – I’m told Moody’s will announce downgrades of some of world’s biggest banks, incl in UK, after US mkts close tonight. – Sky’s Mark Kleinman
Looks like that fabricated 2 notch Margin Stanley downgrade (because 3 notches just won’t do – those 4 months of Gorman-led “negotiations” made that painfully clear) is about to strike. The real question is: What Would Egan Who Do?
Some of Britain’s biggest banks are poised to have their credit ratings downgraded by Moody’s as soon as tonight as part of a wider reassessment of the health of the global banking industry, I can reveal.
Moody’s is expected to outline its verdicts about the creditworthiness of banks including Barclays, HSBC, JP Morgan and Royal Bank of Scotland.
Tags: Bank of America, Banking, Barclays, BNP Paribas, Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Economy, Europe, Global News, Goldman Sachs, HSBC, JPMorgan, Moody's, Morgan Stanley, Nomura, Rating, RBS, Societe Generale, UBS
– Spain Loses Final A Rating With Moodys Downgrade To Baa3, May Downgrade Further – Full Text (ZeroHedge, June 13, 2012):
And so the final Spanish A rating tumbles. Why is this kinda, sorta a big deal? Because as we explained in the end of April, “If all agencies downgrade Spain to BBB+ or below, the ECB could increase haircuts by 5% on SPGBs. The key aspect in terms of the Spanish downgrade(s) is the ECB’s LTRO. If all three rating agencies move Spain to BBB+ or below then under the ECB’s current framework it moves into the Step 3 collateral bucket which requires an additional 5% haircut across the maturities. In classifying its risk management buckets, the ECB uses the highest of the ratings to determine an asset’s position (unlike the sovereign benchmark indices which use the lowest rating, in general). Fitch and Moodys currently rate Spain at A and A3 respectively, with both having a negative outlook in place leaving only a small downgrade margin before Spain migrates to the lower ECB bucket.”
And now the collateral squeeze is on, unless of course the ECB changes the reules one more time. Continue reading »
– Friday Dump Complete: Moody’s Warns Of Spanish Downgrade, Threatens AAA-Countries In Case Of Grexit (ZeroHedge, June 8, 2012):
First we got Spain miraculously announcing late at night local time, but certainly after close of market US time, that the bailout so many algorithms had taken for granted in ramping stocks into the close may not be coming, because, picture this, Germany may have conditions when bailing the broke country’s banks out, and Spain is just not cool with that, and now, after the close of FX and futures trading, we get Moody’s giving us the warning the after Egan-Jones, S&P, and Fitch, it is now its turn to cut the Spanish A3 rating.”As Spain moves closer to the need for direct external support from its European partners, the increased risk to the country’s creditors may prompt further rating actions. The official estimates of recapitalising Spain’s banking system have risen significantly and the country’s indirect reliance on European Central Bank (ECB) funding via its banks has been growing. Moody’s is assessing the implications of these increased pressures and will take any rating actions necessary to reflect the risk to Spanish government creditors. Moody’s rating on Spain is currently A3 with a negative outlook.” Moody’s also warns, what everyone has known for about 2 years now, that Italy could be next: “However, Spain’s banking problem is largely specific to the country and is not likely to be a major source of contagion to other euro area countries, except for Italy, which likewise has a growing funding reliance on the ECB through its banks.” Of course none of this is unexpected. What will be, however, to the market, is when all 3 rating agencies have Spain at BBB+ or below, which as ZH first pointed out at the end of April will result in a 5% increase in repo haircuts on Spanish Government Bonds, resulting in yet another epic collateral squeeze for the country which already is forced to pledge Spiderman towels to the central bank.
Moody’s: Developments in Spain, Greece may prompt euro area sovereign rating downgrades
– Moody’s Downgrades Six German Bank Groups, And Their Subsidiaries, By Up To Three Notches (ZeroHedge, June 5, 2012):
First Moody’s cut the most prominent Austrian banks, and now it is Germany’s turn, if not that of the most undercapitalized German bank yet: “The ongoing rating review for Deutsche Bank AG and its subsidiaries will be concluded together with the reviews for other global firms with large capital markets operations.“
The full downgrade Matrix:
Moody’s takes multiple actions on German banks’ ratings; most outlooks now stable
Frankfurt am Main, June 06, 2012 — Moody’s Investors Service has today taken various rating actions on seven German banks and their subsidiaries, as well as one German subsidiary of a foreign group. As a result, the long-term debt and deposit ratings for six groups and one German subsidiary of a foreign group have declined by one notch, while the ratings for one group were confirmed. Moody’s also downgraded the long-term debt and deposit ratings for several subsidiaries of these groups, by up to three notches. At the same time, the short-term ratings for three groups as well as one German subsidiary of a foreign group have been downgraded by one notch, triggered by the long-term rating downgrades.
– Moody’s downgrades nine Danish banks (AFP, May 31, 2012):
MOODY’S has downgraded the credit rating of nine Danish banks, citing the impact of the rolling eurozone crisis on bank loan quality and on their fund-raising ability.
The nine, along with the Finnish subsidiary of one of the banks, saw their ratings cut one to three notches, with one of them, DLR Kredit, pushed three steps down into the junk-bond realm at Ba1.
“Danish financial institutions face sluggish domestic economic growth, weakening real estate prices and higher levels of unemployment, as well as the risk of external shocks from the ongoing euro area debt crisis,” Moody’s said.
“Asset quality is deteriorating, and these pressures are expected to continue.”
– Postcards From Sweden (ZeroHedge, May 26, 2012):
There are those who claim that rating agencies are utterly irrelevant, incompetent, behind the curve and merely echo chambers of popular opinion. They are 100% right. There is, however, one critical function that rating agencies execute – they put into words what everyone else knows is fact, but are simply unwilling to recognize due to the systemic implications of admitting yet another lie: subprime, failed banks, Europe, etc. By the time a rating agency has finally opined on something in a way indicative of the truth, it is too late to stick one’s head in the sand. Yesterday precisely this happened once more – from the WSJ: “Credit rating agency Moody’s Investor Service Friday downgraded a range of major banks in Sweden and Norway, citing contagion risks from the European debt crisis. But observers said the cuts were less sweeping than feared and reflect the strength of Nordic banks versus their European peers, which risk sharper downgrades as Moody’s continues a Europe-wide review that started earlier this month with cuts to 26 Italian lenders. In February Moody’s placed various ratings of 114 financial institutions in 16 European countries on review for possible downgrades, highlighting the banks’ vulnerability to the euro zone sovereign debt crisis. “We read this as a sign of the strength in relative terms of Swedish banks which are coping well,” Swedish Central Bank Deputy Governor Per Jansson said. Moody’s Friday downgraded the ratings for Sweden’s Nordea Bank AB (NDA.SK) and Handelsbanken AB (SHB-B.SK) by one notch to Aa3, and for specialist agricultural lender Landshypotek AB by two notches to Baa2.” Furthermore, as Zero Hedge reminded two days ago, when it comes to deposit backing, European banks are so levered from a loan-to-deposit ratio, that even the tiniest risk of deposit flight would result in immediate undecapitalization, and further outflows. Oddly, nowehere is this more evident than in various Scandivanian banks such as Danska, Handelsbanken (SHB), Swedbank, and Nordea, two of which were just downgraded by Moody’s.
Visually this can be seen here.
Of course, to readers of Zero Hedge this is not news. Back in March this particular fringe blog explicitly warned, while everyone else kept silent that…
With banks such as Danske, SHB, Swebank, DnB, and Nordea literally at 200% Loan-to-Deposits, but most other European banks too, even the tiniest outflow in deposit cash (ala what is happening in the PIIGS) will send the system into yet another liquidity spasm. Only this time, since what little unencumbered assets remaining have already been pledged to the ECB, there will be no quick LTRO collateral-type fix this time.
Sadly, many preferred to continue sticking their heads in the sand. Until Moody’s announcement made continuation of that avoidance behavior impossible. Which is why we present the following postcard we just got from Sweden. We can only hope this is a very isolated incident of people enjoying to wait in line for a few pieces of paper, completely devoid of any contextual reference. That, or they are all suddenly applying for a mortgage, or in the best case, merely enjoying the wonderful weather, just incidentally next to a branch of one of Sweden’s largest banks.
– Moody’s Downgrades 16 Spanish Banks, As Expected (ZeroHedge, May 16, 2012):
As was leaked earlier today, so it would be:
- MOODY’S CUTS 16 SPANISH BANKS AND SANTANDER UK PLC
- MOODY’S CUTS 1 TO 3 LEVELS L-T RATINGS OF 16 SPANISH BANKS
- MOODY’S DOWNGRADES SPANISH BANKS; RATINGS CARRY NEGATIVE
In summary, the highest Moodys rating for any Spanish bank as of this point is A3. But luckily the other “rumor” of a bank run at Bankia was completely untrue, at least according to Spanish economic ministry officials, so there is no need to worry: it is all under control. The Banko de Espana said so.
Complete summary downgrade grid:
Another way to visualize the bloodbath as Spain no longer has any bank rated A2 or higher:
Full report below: Continue reading »
– Moody’s downgrades Italian banks, outlook negative (Reuters, May 15, 2012):
Moody’s Investors Service downgraded the long-term debt and deposit ratings for 26 Italian banks on Monday, citing the country’s recession and rising bad debt levels.
The banks were all downgraded by at least one notch, and for some, by as many as four notches, Moody’s said, adding all of the banks affected have a negative outlook.
The moves marked another blow for Italy’s top five banks after they were asked to find some 15 billion euros by June to meet tougher capital requirements set by the European Banking Authority due to vast holdings of domestic government bonds.
Economic recession in Italy has worsened credit quality as banks come under pressure from the government to put cheap funding from the European Central Bank to work in the real economy.
“The ratings for Italian banks are now amongst the lowest within advanced European countries, reflecting these banks’ susceptibility to the adverse operating environments in Italy and Europe,” Moody’s said in a statement.
– The Truth About Egan-Jones (ZeroHedge, April 27, 2012):
… but not from us: after all we are known for being biased, which in the mainstream media parlance means calling it like it is. No – instead we leave it to none other than Bloomberg’s Jonathan Weil who does as good a job of being “biased” as we ever could: “Egan-Jones, which has been in business since 1992, could have continued operating as an independent publisher of ratings and analysis, not subject to government oversight or control. Instead it chose to play within the Big Three’s system, exposing itself to regulation and the whims of the SEC in exchange for the government’s imprimatur. Now it’s paying the price.” And not only that: as the most recent example of Spain just shows, where Egan Jones downgraded Spain 9 days ago and was ignored, but well ahead of everyone else, only to be piggybacked by S&P, and the whole world flipping out, it has become clear: calling out reality, and the fools that populate it, is becoming not only a dangerous game, but increasingly more illegal. Then again – this is not the first time we have seen just this happen in broad daylight, with nobody daring to say anything about it. In fact, this phenomenon tends to be a rather traditional side-effect of every declining superpower. Such as the case is right now…
From BBG’s Jon Weil:
The first time I wrote about Sean Egan and his small, independent credit-research firm, Egan-Jones Ratings Co., was in December 2007 for a column about the bond insurer MBIA Inc. (MBI) And man, did he nail it.
The three big credit raters — Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings — all had AAA ratings on MBIA’s insurance unit, their highest grade. Egan said it deserved much lower. Anyone reading MBIA’s financial reports could see the company was losing money and needed billions of dollars of fresh capital.
By mid-2008, the Big Three had cut their ratings. Once again, Egan, a lonely voice of reason who saw the financial crisis coming, had shown his larger competitors to be incompetent or compromised. It was one of many great calls to come for Egan-Jones. As for MBIA, which had no revenue last quarter, it’s still struggling.
So if you had told me back then that the Securities and Exchange Commission’s enforcement division more than four years later would be accusing Egan, and his firm, of securities-law violations — but not any of the big rating companies — there’s no way I would have believed you. That’s what happened this week, though. Continue reading »
Next train ‘Ausschwitz’:
The videos down below are a MUST-SEE!
– America: A Government Out Of Control (ZeroHedge, April 8, 2012):
“A government big enough to give you everything you want, is strong enough to take everything you have”
– Thomas Jefferson
Something odd and not quite as planned happened as America grew from its “City on a Hill” origins, on its way to becoming the world’s superpower: government grew. A lot. In fact, the government, which by definition does not create any wealth but merely reallocates it based on the whims of a select few, has transformed from a virtually invisible bystander in the economy, to the largest single employer, and a spending behemoth whose annual cash needs alone are nearly $4 trillion a year, and where tax revenues no longer cover even half the outflows. One can debate why this happened until one is blue in the face: the allures of encroaching central planning, the law of large numbers, and the corollary of corruption, inefficiency and greed, cheap credit, the transition to a welfare nanny state as America’s population grew older, sicker and lazier, you name it. The reality is that the reasons for government’s growth do not matter as much as realizing where we are, and deciding what has to be done: will America’s central planners be afforded ever more power to decide the fates of not only America’s population, but that of the world, or will the people reclaim the ideals that the founders of this once great country had when they set off on an experiment, which is now failing with every passing year?
As the following video created by New America Now, using content by Brandon Smith whose work has been featured extensively on the pages of Zero Hedge, notes, “we tend to view government as an inevitability of life, but the fact is government is not a force of nature. It is an imperfect creation of man and it can be dismantled by man just as easily as it can be established.” Unfortunately, the realization that absolute power corrupts absolutely, and absolute central planning leads to epic catastrophes without fail, seems a long way away: most seem content with their lot in life, with lies that their welfare money is safe, even as the future is plundered with greater fury and aggression every passing year, until one day the ability to transfer wealth (benefiting primarily the uber rich, to the detriment of the middle class which is pillaged on an hourly basis), from the future to the present is gone, manifesting in either a failed bond auction or hyperinflation. The timing or shape of the transition itself is irrelevant, what is certain is that America is now on collision course with certain collapse unless something changes. And one of the things that has to change for hope in the great American dream to be restored, is the role, composition and motivations of government, all of which have mutated to far beyond what anyone envisioned back in 1776. Because America is now saddled with a Government Out Of Control.
Watch the two clips below to understand just how and why we have gotten to where we are. Also watch it to, as rhetorically asked by the narrator, prompt us to question whether the government we now have is still useful to us and what kind of powers it should be allowed to wield.
Tags: 1984, Ammunition, Assassination, ATK, Bailout, Banking, Barack Obama, Big Brother, Bill Clinton, Bill of Rights, Bonds, Bush administration, Censorship, CIA, Collapse, Concentration Camp, Constitution, Debt, DHS, Dictatorship, Drones, Economy, Eric Holder, Facebook, Fascism, Fast and Furious, FBI, Fed, Federal Reserve, FEMA, First Amendment, Fitch, Fourth Amendment, Freedom, George Bush, George Orwell, Global News, Goldman Sachs, Google, Government, Guantánamo, Guns, Habeas Corpus, Homeland Security, Illuminati, Indefinite Detention, Internet, JPMorgan, Law, Martial Law, Military, Mind-Control, Moody's, Mortgage crisis, Mortgages, NDAA, New World Order, NSA, NSPD 51, Obama administration, Patriot Act, Police, Police State, Politics, Privacy, Protesters, Quantitative Easing, Rex 84, Robert Mueller, SEC, Second Amendment, SOPA, Standard & Poor's, Surveillance, Terrorism, Terrorists, Torture, U.S., War on Terror
– Moody’s: Greek sovereign credit rating remains at C (Reuters, Mar 9, 2012):
March 9 – Moody’s Investors Service says that it considers Greece to have defaulted per Moody’s default definitions further to the conclusion of an exchange of EUR177 billion of Greece’s debt that is governed by Greek law for bonds issued by the Greek government, GDP-linked securities, European Financial Stability Facility (EFSF) notes. Foreign-law bonds are eligible for the same offer, and Moody’s expects a similar debt exchange to proceed with these bondholders, as well as the holders of state-owned enterprise debt that has been guaranteed by the state, in the coming weeks. The respective securities will enter our default statistics at the tender expiration date, which is was Thursday 8 March for the Greek law bonds and is currently expected to be 23 March for foreign law bonds. Greece’s government bond rating remains unchanged at C, the lowest rating on Moody’s rating scale.
Moody’s understands that 85.8% of debtholders holding Greek-law bonds issued by the sovereign have agreed to the exchange, with the vast majority of remaining bondholders likely to be drawn in following the exercise of Collective Action Clauses that will be inserted pursuant to a recent Act by the Greek parliament. The terms of the exchange entail a discount – a loss to creditors – of at least 70% on the net present value of existing debt. According to Moody’s definitions, this exchange represents a `distressed exchange’, and therefore a debt default. This is because (i) the exchange amounts to a diminished financial obligation relative to the original obligation, and (ii) the exchange has the effect of allowing Greece to avoid payment default in the future.
– Greece averts immediate default, markets sceptical (Reuters, Mar 9, 2012):
Greece averted the immediate threat of an uncontrolled default on Friday, winning strong acceptance from its private creditors for a bond swap deal which will eat into its mountainous public debt and clear the way for a new bailout.
With euro zone ministers set to approve the 130 billion euro (109 billion pounds) rescue, French President Nicolas Sarkozy declared the Greek problem had been settled – just as Germany said that any impression the crisis was over “would be a big mistake.”
Markets sharply marked down the value of new Greek bonds to be issued to the creditors, reflecting the risk of paralysis after elections expected this spring and doubts about whether Athens can bring its debt to a more manageable level by 2020.
Sarkozy, who is trailing his socialist challenger for the presidency before France’s own elections in April and May, pronounced the Greek deal a major success.
“Today the problem is solved,” he said in the southern French city of Nice. “A page in the financial crisis is turning.”
Euro zone finance ministers held a teleconference call and were expected to declare Athens had met the tough terms of the bailout, its second since 2010, and to authorise the release of funds which the country needs to meet heavy debt repayments later this month and avoid bankruptcy.
On the streets of Athens, some Greeks denounced the deal as a sham that would impose more crippling austerity on a people already enduring pay and pension cuts and soaring unemployment.
German Finance Minister Wolfgang Schaeuble was also in a more sombre mood than Sarkozy, issuing a warning to Athens which has a record of failing to meet its promises of reform and austerity made to international lenders.
“Greece has today got a clear opportunity to recover. But the precondition is that Greece uses this opportunity,” he told a news conference. “It would be a big mistake to give the impression that the crisis has been resolved. They have an opportunity to solve it and they must use it.”
Under the biggest sovereign debt restructuring in history, Greece’s private creditors will swap their old bonds for new ones with a much lower face value, lower interest rates and longer maturities, meaning they will lose about 74 percent on the value of their investments.
“A VERY GOOD DAY”
Data published on Friday underlined the depth of Greece’s problems. It showed the economy shrank 7.5 percent in 2011, marking the fourth successive year of recession.
That was worse even than 1974, when Greece’s military dictatorship collapsed following a confrontation with Turkey over Cyprus and as a leap in oil prices hit economies around the world. That year the Greek economy shrank 6.4 percent.
Nevertheless, Greek Finance Minister Evangelos Venizelos hailed the bond swap, which the European Union and IMF had demanded in return for the new bailout, as marking a long-awaited success for all Greeks enduring a painful recession.
“I hope everyone will realise, sooner or later, that this is the only way to keep the country on its feet and give it the second historic chance that it needs,” Venizelos, who led often ill-tempered negotiations with the EU and IMF, told parliament.
He said the bond deal had cut its debt by 105 billion euros.
– Greece Has Defaulted: Here Is Where We Stand (ZeroHedge, Mar 9, 2012):
After reading this, everyone should have a fairly good grasp of what happened not only today, but ever since the great (and quite endless) European financial crisis took center stage, and what to look forward to next…
In a nutshell—okay, a coconut shell—this seems to be where we are:
1) Greece was able to write off 100 billion euros worth of debt in exchange for a 130 billion rescue package of new debt, of which Greece itself will receive 19%, or about 25 billion, so that it can continue to operate as an ongoing concern. Somehow Greece is in a better position than before, with more debt and less sovereignty and still—by virtue of sharing a common currency—trying to compete toe-to-toe with the likes of Germany and the Netherlands, kind of like being the Yemeni National Basketball team in an Olympic bracket that includes the US, Spain and Germany. At least a “within the euro” default prevented bank runs in Portugal, Spain, Italy et al.
2) As a result of the bond haircuts, Greece has many pension plans that can no longer even pretend to be viable, at least according to the original contracted scheme, but pensionholders still working can take heart in the fact that their current wages will be cut, too.
– A&G’s AIG Moment Approaching: Moody’s Downgrades Generali, Cuts Megainsurer Allianz Outlook To Negative (ZeroHedge, Feb. 15, 2012):
Don’t worry though, those who don’t understand jack shit will tell you it is all contained. But please ask them why – and ask them why Lehman wasn’t when everyone said it too was.
– Moody’s warns may cut AAA-rating for UK and France (Reuters, Feb. 14, 2012):
Rating agency Moody’s warned it may cut the triple-A ratings of France, Britain and Austria and it downgraded six other European nations including Italy, Spain and Portugal, citing growing risks from Europe’s debt crisis.
– Moody’s cuts ratings on Italy, Portugal and Spain (Washington Post, Feb. 14, 2012):
NEW YORK — Ratings agency Moody’s Investor Service on Monday downgraded its credit ratings on Italy, Portugal and Spain, while France, Britain and Austria kept their top ratings but had their outlooks dropped to “negative” from “stable.”
Moody’s also cut its ratings on the smaller nations of Slovakia, Slovenia and Malta. All nine countries are members of the European Union.
London, 13 February 2012 — As anticipated in November 2011, Moody’s Investors Service has today adjusted the sovereign debt ratings of selected EU countries in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries’ own specific challenges.
– Rating Action: Moody’s adjusts ratings of 9 European sovereigns to capture downside risks (Moody’s, Feb. 13, 2012):
Moody’s actions can be summarised as follows:
– Austria: outlook on Aaa rating changed to negative
– France: outlook on Aaa rating changed to negative
– Italy: downgraded to A3 from A2, negative outlook
– Malta: downgraded to A3 from A2, negative outlook
– Portugal: downgraded to Ba3 from Ba2, negative outlook
– Slovakia: downgraded to A2 from A1, negative outlook
– Slovenia: downgraded to A2 from A1, negative outlook
– Spain: downgraded to A3 from A1, negative outlook
– United Kingdom: outlook on Aaa rating changed to negative
Flashback ( on ECB’s Mario Draghi):
– Mario Draghi (Wikipedia):
Draghi was then vice chairman and managing director of Goldman Sachs International and a member of the firm-wide management committee (2002–2005). A controversy existed on his duties while employed at Goldman Sachs. Pascal Canfin (MEP) asserted Draghi was involved in swaps for European governments, namely Greece, trying to disguise their countries’ economic status.
– French banks downgraded by Moody’s (Telegraph, Dec. 9, 2011):
Moody’s has downgraded BNP Paribas, Societe Generale, and Credit Agricole warning their creditworthiness is being damaged by the fragile operating environment for European banks.
The agency cut its ratings on the long-term debt of BNP and Credit Agicole by one notch to Aa3, concluding reviews that began in June and were continued in September. Societe Generale’s long-term debt was cut by one notch to A1.
The downgrades were driven by the increasing difficulties the banks were having in raising funding and the worsening economic outlook, Moody’s said.
The news comes a day after the European Banking Authority (EBA), warned the region’s banks must find €114.7bn of extra capital in order to withstand the euro zone debt crisis and restore investor confidence.
Moody’s said its ratings did take into account the fact that all three French banks were likely to benefit from state support if the crisis deepened.
“Liquidity and funding conditions have deteriorated significantly,” said Moody’s, adding that the banks have historically relied on wholesale funding markets.
“The probability that the will face further funding pressures has risen in line with the worsening European debt crisis.”
– Eurozone banking system on the edge of collapse (Telegraph, Dec. 9, 2011):
Senior analysts and traders warned of impending bank failures as a summit intended to solve the European crisis failed to deliver a solution that eased concerns over bank funding.
The European Central Bank admitted it had held meetings about providing emergency funding to the region’s struggling banks, however City figures said a “collateral crunch” was looming.
“If anyone thinks things are getting better then they simply don’t understand how severe the problems are. I think a major bank could fail within weeks,” said one London-based executive at a major global bank.
Many banks, including some French, Italian and Spanish lenders, have already run out of many of the acceptable forms of collateral such as US Treasuries and other liquid securities used to finance short-term loans and have been forced to resort to lending out their gold reserves to maintain access to dollar funding.
“The system is creaking. There is a large amount of stress,” said Anthony Peters, a strategist at Swissinvest, pointing to soaring interbank lending rates.