The Banking and Strategy Initiative

Chillin' out till it needs to be funded

One down , one to go? The downgrades cascade priced in


Image by Getty Images via @daylife

UPDATE: As of Friday, both Italy and Spain remain downgraded to AA- but the amount of Capital required is a behemoth the Eurozone may not be able to tackle, so it still seems like there is more to come

Italian and Spanish CDS spreads across 5 y and 10 y already count in a couple of downgrades at 550 bps spreads and thus the market was able to enjoy the whiff of political stability in Europe with the IMF extending its mandate and the ECB also getting a chance to back its EFSF with more guarantees and leverage it for bank and bond purchases around the union.

The new budget for Greece, did gave a finality to their picture and seemingly more market commentators were happy at being right as European Banks like Deutsche Bank and UBS adjusted to their sovereign holdings and lax regulatory compliance ( not just by letter of the law) in that order

Meanwhile banks could stiull post positive results esp as Goldman Sachs covers for the lack of industry revenues with cuts in compensation for the quarter and Citi earns its CEO the Global Indian award. Of concern the falling housing market, the new action by Atoorney Generals against BNY mellon and continuing rage against $5-$15 debit card membership fees from BofA to Citi, not the Italian downgrade Also some like me would have even priced in a french bankruptcy and bailout which is almost inevitabele and looks like a valid cornerstone/cornice from where the turnaround can begin, hopefully without an American recession.

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