With the downgrade of EU’s emergency funding fund, the US credit rating agency Standard & Poor have made the whole rating business a fucking joke. If you think this will make waves in tomorrow’s markets, forget it! Nobody takes this shit serious anymore…
“Triple-A or no triple-A, I couldn’t care less.”
“On Jan. 13, 2012, we lowered to ‘AA+’ the long-term sovereign credit ratings on two of the European Financial Stability Facility‘s (EFSF’s) previously ‘AAA‘ rated guarantor member states, France and Austria,” S&P writes in a press release. Adding: “The EFSF’s obligations are no longer fully supported either by guarantees from EFSF members rated ‘AAA’ by Standard & Poor’s, or by ‘AAA’ rated securities.” Well, we already know that, morons!
And you can’t say A without saying B, also, in this business. So, in light of last weeks mass downgrade of European core nations, this is just a natural consequence.
But it becomes rather ridiculous when we’re talking about an international emergency fund that the EU leaders are able to do whatever they want with. Perhaps they choose to “print” enough euros to ten-fold the size of the fund?
Nobody knows anything for sure, these days.
And that’s why most financial pros just don’t give a damn about the rating actions anymore; it’s no longer possible to take the rating business serious.
And, as Norwegian chief economist Shakeb Syed, rightfully points out – there are far more important things to worry about when it comes to the EU economy than its stupid stability facility.
Syed recon there will be some reactions in the financial markets on Tuesday, but not much,
“In the market, the fund have implied interest costs that is not consistent with a triple-A. So, in practice, the difference is not that great,” Syed points out.
The Norwegian analyst also says what many financial pros are thinking these days;
“The EFST is a dead-end.”
“Triple-A or not, the fund will never be big enough th cover both Spain and Italy,” he notes.
And Shakeb Syed seems too keeping the right focus, stating that investors should be more worried about the ECB than the EFSF.
Anyway – here’s a little more from today’s “shocker” by Standard & Poor’s:
“The developing outlook on the long-term rating reflects the likelihood we currently see that we may either raise or lower the ratings over the next two years.”
“We understand that EFSF member states may currently be exploring credit-enhancement options. If the EFSF adopts credit enhancements that in our view are sufficient to offset its now-reduced creditworthiness, in particular if we see that once again the EFSF’s long-term obligations are fully supported by guarantees from EFSF member-guarantors rated ‘AAA’ or by securities rated ‘AAA’, we would likely raise the EFSF’s long-term ratings to ‘AAA’.”
“Conversely, if we were to conclude that sufficient offsetting credit enhancements are, in our opinion, not likely to be forthcoming, we would likely change the outlook to negative to mirror the negative outlooks of France and Austria. Under those circumstances we would expect to lower the ratings on the EFSF if we lowered the long-term sovereign credit ratings on the EFSF’s ‘AAA’ or ‘AA+’ rated members to below ‘AA+’.”
So, anyway the wind blows……
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- EFSF Loses AAA Rating After S&P Downgrades of France, Austria (businessweek.com)
- S&P Downgrades Eurozone Bailout Fund (Update1) (thestreet.com)
- Market Extra: S&P downgrades anticipated, but still stir turmoil (marketwatch.com)