In the prodigiously long and detailed judgement from Australia’s Federal Court on the CPDO affair, there is a story jumping out from behind the complexity of the product itself. It’s about the key role played by former Standard & Poor’s employees who had left the rating agency to go to banks to help structure these products. Read more
Treasury yields closed lower on the day Standard & Poors warned that it might cut the United States’ AAA rating, FT Alphaville says. That’s an indication of deflationary and liquidity trap effects in the market, as investors look to the impact on growth of deficit cutting, and also price in fewer supplies of future Treasuries for purposes of quality collateral. Other observers have different explanations. The bond market sees S&P’s action as a spur to budget discipline, Brad DeLong writes in the FT. Goldman’s Jan Hatzius argues that lower growth from austerity implies easier monetary policy, complicating Treasury yields even further, FT Alphaville adds. Read more
No let up in the austerity please, Mr Osborne. That’s pretty much the message from S&P, which reaffirmed the UK’s AAA rating on Monday but maintained its negative outlook.
For the record, a negative (or a positive) outlook from the rating agency indicates a one-in-three chance of a rating change over a period of six months to year. Read more
A study by credit rating agency Standard & Poor’s has raised questions over the financial strength of some of the biggest banks ahead of new rules that could require them to raise more funds. The analysis by S&P showed that HSBC is the world’s best capitalised bank, while Switzerland’s UBS, Citigroup of the US and several of Japan’s biggest banks are among the weakest. The ranking of 45 of the world’s top banks highlights yet again the continuing capital shortfall at some key institutions. Read more