Chillin' out till it needs to be funded
While we are staying with the non index products of S&P, it is well nigh clear to all the credit ratings’ detractors that the three S&P, Moody’s and more are trying their best to come out of the pretty bad corner of 2008. Though the rating companies ( and none of them are fast blind factories or slow uncertain webs of intrigue) did never really get indicted, they cut a rather sorry picture in 2008 when they were giving out upgrades to soon to vanish off the face of the earth giants.
Unfortunately the trading room has been very busy for us and while the big investment banks get out of trading , the ones to research the news on whether the rating agencies are coming up from behind the curve to recommend proactive action after or even without new regulation in place is like hunting for smoked salmon in the snows of Alaska. So, please do supplement these readings with more research from Reuters and do not mind flipping thru the WSJ, NY Times and the FT or the national dailies you subscribe to.
While none considered Euro’s long break from sanity in 2010 as a simpe affair they did expect that most of the rough patches have gone away and with redemption in $5 and $10 billion euro scale more than two months away for Portugal; the new rules at the EFSF done over the weekend; the cajas consolidation well in place with more than EUR 15 bln in IPOs like a rehearsed press machine on cue the European crisis seems well in control and the Germans also satisfied. Still, S&P preferred this time to activate its trumps rather than wait for the hrnet’s nest to come well oout in the open and that could well become over riding policy for others in a world of ill consulted, almost private and strikingly individual assessments and ratings of regions, nations, corporations and municipalities as the debt requirements ( strikingly prominent as the reason for the rating) of each remain different but the veil of privacy leading to numerous questions about the ethical contract for the raters and the auditors that we all want to be and we all need to employ.
It does leave the Euro at a loose end with recovery cut off mid way by the renewed sour grapes, Greek CDS ruling at 900 bp and Portugal at less than half with 450 last week likely to shoot up after the ratings published ( it does depend if specific tranches and tenures have been listed in the rating) Still the situation in Spain and Portugal is more a concern of the resepective markets and their international franchise per se than that for the peripherals like Greece and Ireland who are sitting with the new terms of reference for how to pay back the EFSF. The ratings agencies however need to get across the pond as well even as banks deleveraging head west for new corporate business and states and municipalities , having tapped the markets thru 2009 and 10 successfully and now looking for a calmer disposition of the markets thus unfortunately facing a similar moral turpitude that could test the ethical contract of the raters and require complex stress scenarios to be honestly evaluated without using positive or negative bias as fortitude unknowingly, unwittingly, or worse otherwise
Interestingly the Chinese infrastructure train has come to a hurtling stop mid construction and PBOC and CBRC also have their hands full. But then the rating agencies are not going to find easy takers there yet!
In that probably S&P is also capable of overcoming the possible parochial information asymmetry reasons that cause emergency actions from these seeming bulwarks. such reasons include the nationalist opinion in a Portugal where Demand and supply are quite healthy and bank debt is not the reason for the crisis, giving its debt liquidity crisis rather sturdy color till now with analysts. Its just investment grade BBB- is more a reality of equality between developed and developing markets and a continuing match up of on-ground conditions for future lending in Europe vis-a-vis the restructured balance sheets and their weaknesses/strengths
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