… ironically the source would appear to be Société Générale.
Or more specifically its Rates Strategy team, which made the following observations in their daily note on Monday.
Rating agencies monitoring –Italy:
1) Moody’s – Italy is Aa2 since 2002, but now on downgrade review since 17 June; Moody’s also signalled (18 July) imminent actions on regional/local government.
2) Fitch at AA- stable since Oct-2006. Fitch published a note 13 July ‚Risks to Italy’s Public Finances‛, but still kept a stable outlook.
3) S&P’s outlook for its ‚A+ u‛ was revised to negative on 20 May. The last downgrade was in 2006.
So downgrades of Italy by all three agencies look probable, given recent developments. The main motives are likely to be 1) budgetary and macro outlooks; 2) uncertainties over the availability of market financing; and 3) Italy’s high rating relative to peers (as far as Fitch, and especially, Moody’s, is concerned).
Well, a downgrade from Moody’s is probable. In fact, we can expect to hear something from very soon — that’s because a decision usually follows 90 days after a review is announced. We are less sure about S&P. As for Fitch it would have to put Italy under review before any downgrade.
No matter. SocGen is right to be worried about the budgetary and economic outlook for Italy, if these flashes are anything to go by.
RTRS-ECB’S DRAGHI SAYS ECB BUYING OF ITALIAN BONDS IS TEMPORARY, CANNOT CIRCUMVENT FUNDAMENTAL BUDGETARY DISCIPLINE
RTRS-ITALY LIKELY TO MISS OFFICIAL FORECASTS OF 1.1 PCT GDP GROWTH IN 2011, 1.3 PCT IN 2012-GOVT SOURCE
MILAN, Sept 5 (Reuters) – Italian economic growth is likely to fall short of the government’s official forecast of 1.1 percent in 2011 and 1.3 percent in 2012, probably coming in under 1 percent, a senior government source said on Monday. “It will be very difficult for Italy to reach 1.1 percent growth this year and next,” the official, who spoke on condition of anonymity, told Reuters.
And it is surely right to say that market might be priced for a one notch downgrade but not two.
Worryingly, Italian duration is slipping longer term, as investors become more wary. There is nothing to suggest that the little blip we saw after the 30 August auction is anything other than a blip. Remember that Italy is also the third largest borrower in the world, and that no negative rating moves have been seen since 2006. So there will be ramifications from Italy downgrades.
Where’s the ECB? – FT Alphaville