sovereign rating

Not one eurozone country deserved a credit rating upgrade in the past quarter, while some, such as Spain, deserved six-notch downgrades, new data show. Indeed, 13 of the worst-performing 15 countries were European (see Q-o-Q change column; source: CMA data).

The UK, by contrast, did deserve a one-notch upgrade. (The bad news is that even an upgrade leaves the UK’s implied rating one notch below its actual rating of AAA.) Far greater winners were Guatemala, Uruguay, Egypt, Bahrain and Colombia, which all merited multi-notch upgrades. Read more

The minimum rating on assets accepted as collateral at the Bank of England is Aa3 — but they can accept lower ratings whenever they please. That is the message of a Bank “clarification” issued today.

Conspiracy theorists might spot a pattern here. The ECB reduced its minimum threshold from A- to BBB- during the crisis, and recently extended this temporary measure into 2011. Read more

Moody’s outlook on Bulgaria’s Baa3 sovereign rating has been raised from stable to positive. It’s the first positive rating action on an EU sovereign since July 2008.

The positive outlook means Moody’s is considering upgrading the Bulgarian sovereign to Baa2. Such an upgrade is contingent upon the country’s ability to renew growth and weather the impact of regional shocks. Read more

Structural uncompetitiveness, coupled with the constraints of monetary union, mean Portugal will ‘bleed’ economic potential and tax-raising capacity.

So says Moody’s in their European Sovereign Ratings Outlook for 2010. On the upside, Moody’s says the risk of a ‘sudden death’ – a balance-of-payments crisis – is small. On the downside, the risk of a ‘slow death’ is high. Death in either timeframe is presumably unwelcome. Read more

Standard and Poors has just cut Greece’s credit rating from A- to BBB+, having placed the country on credit watch on December 7. The new rating matches that of Fitch, which cut on December 8. The rating is two notches above junk grade status, and also two notches above the (temporarily reduced) ECB collateral requirement of BBB-. Greece is now one notch above Mexico, which was downgraded to BBB by Moody’s yesterday.

… in a competition no-one would want to win. In its sovereign risk review, Moody’s has compiled a “misery index” – the addition of the forecast unemployment rate to the forecast fiscal deficit, 2010. It isn’t pretty. The UK’s forecast fiscal deficit – the highest of any country on the chart – places the country in a higher state of misery than Iceland, and only just less miserable than Greece. The top five are not, perhaps, surprising – but numbers six and eight should give us pause for thought.

Yield spreads between Greek and German 10-year bonds are the widest in seven months following Fitch’s downgrade of Greece, indicating the divergent fortunes of eurozone members.

Fitch Ratings cut Greece’s credit ratings to BBB plus with a negative outlook, a day after rival ratings agency Standard & Poor’s placed Athens on credit watch. Poor public finances are to blame. The Fitch downgrade makes Greece the first eurozone country to have its sovereign debt reduced below investment grade A by the credit rating agencies. The dollar rose 0.3 per cent versus the euro in early afternoon trading on Tuesday, following the move by Fitch, to $1.4774.

The ratings agencies have been busy: we are awash with downgrades and warnings. First up, S&P. They have ranked banks’ health using a new methodology, and it makes for grim reading. Just nine of 45 banks exceeded the minimum “risk-adjusted capital” ratio (for example, HSBC did well; UBS and Citigroup less so). The results are important because the new methodology foreshadows the new capital regime ratio likely to be adopted by Basel next year. S&P conclusion: “Capital for the majority of banks remains a relative weakness.”

Next, Fitch has downgraded Mexico to BBB, just two notches above junk status. Read more

Moody’s view of UK rating is unaffected – or indeed slightly improved – by changes to the terms with RBS and Lloyds, but cautions Lloyds remains under “implicit UK guarantee”. Table shows changes to bail-out package. Read more