Posts tagged 'Moody's'

Raters’ sovereign bias, a new rebuke

Another salvo arrives in the intellectual spat over whether or not credit rating agency opinions have been subject to country bias, possibly influencing Europe’s debt crisis.

After we featured a strongly worded piece by the Unicredit economist team in March, IPE magazine asked them to turn it into an article.

IPE asked for responses from the three big agencies. Fitch again declined, S&P replied along the lines of the one given to us, while Moody’s decided to comment specifically on the Unicredit paper.

We’ll sample the arguments below, but in preview Erik Nielsen is not impressed and has dared the rating agencies to meet in front of regulators and or academic specialists to compare notes. Watch this space. Read more

Sovereign rating bias, a clanging gauntlet lands [Update]

We’ve featured one study that claimed to find bias in sovereign ratings, written in the measured tones of academia, which was enough to set off some tit-for-tatting between S&P and the authors.

Well the members of UniCredit’s economics team have decided to enter the debate, and they have no intention of holding back on “the damaging bias in sovereign ratings”. The low down to follow, but lets skip to the conclusion:

In light of our findings, we suggest that credit rating agencies should be stripped of their regulatory powers and these transferred to an international body. Failing that, the ratings agencies should be forced to substantially increase transparency, including publishing a separate breakdown of the objective and subjective components of ratings, the minutes of the rating committees, and the voting records.

 Read more

Home is where the heart is, sovereign rating edition

To the many sticks used to bash the credit rating agencies for their role in the (near) downfall of the financial system, we can now add a new one: home bias.

The complaint comes with academic credentials from two economists at the University of Heidelberg, Andreas Fuchs and Kai Gehring, who have looked at the ratings produced by nine agencies in six countries for 143 sovereign issuers.

It turns out that economic and cultural ties produce a more favourable view of the homeland and, guess what, it has become more pronounced since the financial crisis. Read more

ESMA: ‘Get the raters!’

You might expect an EU-sponsored investigation into the sovereign ratings process as practiced by Moody’s, S&P and Fitch to be coloured, politically. But that would be casting aspersions on the upright professionals running the European Securities and Markets Authority.

Emoticon Read more

Subprime securities – still being downgraded

If you woke up on June 10, 2013 and thought the subprime securities crisis was behind us, well, you were wrong.

Some two weeks ago Moody’s announced it was downgrading 28 tranches of various bonds (as well as upgrading two tranches, and confirming others) in an action that covered roughly $1.2bn worth of mortgage-backed securities (MBS). Read more

It’s never fun being the little guy

Just as your risk of a dodgy bailout is determined by your size so too, perchance, is your risk of an odd ratings action. On Tuesday Slovenia’s credit rating was junked by Moody’s, forcing it to call off a planned US dollar debt sale.

Those we have talked to are pretty baffled by this one. Not only does the timing seem strange but the critiques leveled are questionable (more on that below) particularly when you take into account the depth of the cut from Baa2 to Ba1. Read more

‘This downgrade is nonsense!’

That’s the considered opinion of Julian D. A. Wiseman (most recently head of UK rates strategy at Société Générale but writing on his personal blog here) on the Monday after Moody’s cut its credit rating for the UK from Aaa to Aa1, taking the Bank of England down with it. For those keeping count, that makes it a downgrade that was neither surprising, nor informative nor, in itself, damaging (as Martin Wolf put it)… but more to the point it was just plain silly. Read more

Hey look, even wealthy countries can suffer creditworthiness-threatening financial crises

Moody’s announced on Tuesday that it’s reviewing its sovereign credit ratings methodology, and seeking comment from industry participants.

The review comes probably not a moment too soon — and we are not just talking about the French getting very cranky. Bloomberg reckons Moody’s sovereign ratings are unpopular, even by the low standards of sovereign ratings popularity: Read more

The ESM loses an Aaa

Moody’s has cut the eurozone bailout fund’s credit rating to Aa1, and maintained a negative outlook. It also removed provisional Aaa ratings from debt issued by the EFSF.

In a statement, the ratings agency blamed… France, whose own Aaa rating it cut last week: Read more

An actual consequence of France’s downgrade?

Not many people seem bothered by France’s overnight downgrade by Moody’s. The euro shrugged and French bond yields crept upwards at a snail’s pace.

But one place the downgrade might have a real and lasting impact is within the Swiss National Bank. They have a predilection for core eurozone bonds and the downgrade might just prompt them to ditch what holdings they have and/or stop loading up on French debt.
 Read more

Moody’s cuts France’s Aaa rating, may want to check if its next baguette explodes

Moody’s has cut France to Aa1 from Aaa, maintaining the negative outlook originally conferred in February.

Pierre Moscovici, French finance minister, was stoic at pixel time. “Moodys is now giving France the same rating as Standard & Poor’s, which has allowed us to live with low interest rates for many months,” he told Reuters. S&P cut its AAA rating for France back in January. Read more

Rating agencies have a funny way of agreeing about Spain

“Moody’s keeps gun pointed at Spain but does not pull trigger” was one of the more colourful headlines to come from the agency’s confirmation of the sovereign’s Baa3 rating with a negative outlook on Tuesday. A little rally in bonds and equities duly followed:

After the two notch downgrade by S&P about a week ago, both agencies now have the sovereign on equivalent ratings. It’s pretty hilarious to compare and contrast the reasons for each agency’s (in)action. Read more

Spanish bonds are feeling positively Moody

That’s Spain’s 10yr spread over German Bunds dropping below 400 points for the first time since the start of April:

Spanish 10yr fell to 5.547 with Bunds touching 1.5864.

Probably something to do with Moody’s qualified endorsementRead more

Moody’s on Spanish banks and others on the bailout muddle

The Oliver Wyman report landed last week. The headline was that Spain’s banks would need almost €60bn in new capital and that seven out of the 14 Spanish banks under review failed the ‘bottom up’ test.

The actual recap figure was €59.3bn, falling to €53.7bn because banks are allowed to count in both mergers in which they’re involved and deferred tax assets. We expressed some scepticism about those DTA’s and the rather hopeful proposition that… Read more

A week of Spain-related excitement is not over just yet

Spain has been grabbing the headlines all this week and while it may be Friday afternoon, the excitement isn’t over just yet. Moody’s is widely expected to announce whether it’s going to downgrade Spain’s Baa3 credit rating (possibly to junk) Friday after the European markets close. Oliver Wyman’s second audit of the country’s banking system should come out around the same time.

Ahead of all that we wanted to talk you through a quick recap of the latest developments because, as UBS strategist Justin Knight rightly points out, “the areas of concern are now becoming numerous” and it’s making the question of when Spain might request aid increasingly complex. Read more

Moody’s: EU outlook moved to negative

The rationale here is pretty rational.  From the rating agency’s statement on Tuesday…

The negative outlook on the EU’s long-term ratings reflects the negative outlook on the Aaa ratings of the member states with large contributions to the EU budget: Germany, France, the UK and the Netherlands, which together account for around 45% of the EU’s budget revenue. The creditworthiness of these member states is highly correlated, as they are all exposed, albeit to varying degrees, to the euro area debt crisis. Read more

Fattening tails in euroland structured finance

A request for comment by Moody’s — on how to rate asset-backed securities experiencing “rapid country credit deterioration”:

(Click to enlarge) Read more

It’s Monday, it’s Moody’s, it’s negative on eurozone AAAs

Finland is a rare stable Aaa-rated credit in the eurozone, according to the ratings agency, which placed Germany, the Netherlands and Luxembourg on a negative outlook.

Possible contingent liabilities from rescuing Spain and/or Italy loomed large. Read more

Moody’s cuts Italy two notches

Moody’s left Italian sovereign debt two notches above junk on Friday, after downgrading it from A3 to Baa2.

The rating agency cited “signs of an eroding non-domestic investor base” for Italy’s bonds. Read more

Moody’s revises Barclays’ debt rating outlook to negative

Key sentence is “senior resignations at the bank and the consequent uncertainty surrounding the firm’s direction are negative for bondholders”, although they add that recent events could be positive over the long term. Below is the full statement:

Moody’s changes outlook on Barclays’ standalone rating to negative Read more

Moody’s downgrades Spanish banks

Spanish banks have been downgraded by Moody’s because of their counterparty exposure to the sovereign that backstops them which itself just had its credit rating downgraded by Moody’s because of its pledge to support the banks on which it depends for LTRO funding.

Or something. Read more

The Moody’s bank downgrades

New York, June 21, 2012 — Moody’s Investors Service today repositioned the ratings of 15 banks and securities firms with global capital markets operations. The long-term senior debt ratings of 4 of these firms were downgraded by 1 notch, the ratings of 10 firms were downgraded by 2 notches and 1 firm was downgraded by 3 notches. In addition, for four firms, the short-term ratings of their operating companies were downgraded to Prime-2. All four of those firms also now have holding company short-term ratings at Prime-2. The holding company short-term ratings of another two firms were downgraded to Prime-2 as well.

Morgan Stanley was downgraded by two notches rather than the three which were possible. Nine other banks also lost two notches. Moody’s did downgrade Credit Suisse three notches though. The full list… Read more

Does Moody’s not read the FT letters page?

From Mr Michael Maslinski, on Thursday

Sir, Richard Lesmoir-Gordon (Letters, June 8) is undoubtedly right in his conclusion that the excessive reliance on mathematics and financial models has driven out the traditional banking skills of “common sense, assessment of character, knowledge of history, how countries and cultures differ and experience of life”… Read more

Moody’s cuts Spain to one notch above junk

UPDATE: Cyprus downgraded too — see below.

Just last Friday, Moody’s warnedRead more

Moody’s tries to ruin our weekend, would have succeeded were it not already ruined

We already knew we’d have to watch for a Spanish banking bailout request tomorrow.

Now comes Moody’s with a report warning that “recent developments in Spain and Greece could lead to rating reviews and actions on many of the euro area countries” — and offering a generally downbeat if less-than-original assessment of the euro zone’s future in general. Read more

What five years of crisis history tells us

Who doesn’t like a good dataset?

As markets wade into the second quarter of 2012, reflect for a moment on the fact that the crisis sparked by subprime mortgages now has nearly five years’ worth of observational data. This is very exciting for nerds, since the conclusions from studying the period will get progressively more meaningful and insightful — something not lost on the credit strategy team at Deutsche Bank when they published their 2012 Default Study on Monday. Read more

More bank downgrades to come (eventually) (probably) (irrelevantly?)

Not a huge deal, but one to file away for May lest bank stakeholders get complacent after the recent stress test results.

We vaguely remember some people getting caught a little off guard when S&P downgraded a slew of banks last November because of a methodology change. Read more

Moody’s is reviewing a long list of European and global banks

Moody’s ratings of Credit Suisse, Morgan Stanley and UBS are set to fall up to three notches after the ratings agency announced reviews of both European banks, and global banks and securities firms with credit market operations. Some banks, of course, fall into both categories and will be reviewed on both counts.

There were several statements, so rather than pasting them all in full, here are a few highlights. Read more

Moody’s shifts outlook for UK and France

Rating agency Moody’s warned on Monday it may cut the triple-A ratings of France, the United Kingdom and Austria, and it downgraded six other European nations including Italy, Spain and Portugal, reports Reuters. Putting the United Kingdom’s rating in jeopardy for the first time, Moody’s said it was worried about Europe’s ability to undertake the kind of reforms needed to address the crisis and the amount of funds available to fight it. It also said the region’s weak economy could undermine austerity drives by governments to fix their finances. The US rating agency said it changed the outlooks for the ratings of France, the UK and Austria to negative due to “a number of specific credit pressures that would exacerbate the susceptibility of these sovereigns’ balance sheets.”  George Osborne, the UK chancellor, said the move supported the government’s tough austerity measures and was “a reality check for anyone who thinks Britain can duck confronting its debts”, reports the FT. But Ed Balls, Labour’s shadow chancellor, described the decision as a “significant warning to a chancellor who himself made balancing the books by 2015 and the views of the credit rating agencies the key benchmarks for the success of his economic policy”.

Moody’s vs Europe — in full

Spain and Italy downgraded, France (and the UK) on negative outlook. The EFSF affirmed. A slew of Moody’s ratings actions on the eurozone crisis late on Monday…

(Click image for full ratings statement)