Claire Jones

European Central Bank data, out Thursday, showed that the amount of cash that businesses and households are parking in Spanish banks rose in September for the first time since the spring.

Deposits held by Greek and Italian banks also rose last month, while those parked in German banks dipped slightly.

One swallow does not make a summer. But residents of the Eurotower will be cautiously optimistic that the fact that banks in Greece and Spain are no longer haemorrhaging deposits shows that one of the aims of the ECB’s Outright Monetary Transactions programme is being fulfilled with the central bank yet to buy a single bond. Read more

The cost of rehabilitating the Spanish banking sector is partly behind Moody’s decision to downgrade Spanish government debt from Aa1 to Aa2 today. The rating has been left with a negative outlook, meaning a further downgrade is likely within two years if there is no improvement. Moody’s also completed its review of Greek debt with a three notch downgrade earlier this week. It seems the agency has saved the most sensitive review – that of Portugal – till last; it is due out before March 21 but is more likely to appear next week.

Moody’s decision completes a set of Spanish downgrades by all three main ratings agencies in recent weeks. S&P downgraded to AA (equivalent to Moody’s Aa2) on February 1, and Fitch downgraded to AA+ (equivalent to Moody’s Aa1) on March 4. Reasons given: Read more

Moody’s rating agency has just downgraded Greece’s government bonds to B1 from Ba1, placing the debt on negative outlook, meaning further downgrades are likely. The move takes Greek debt from borderline junk to “highly speculative” territory.

Fitch and S&P still rate Greek debt three notches higher at BB+ (the equivalent of Ba1, Moody’s previous rating), but this might not last long. Fitch last downgraded on January 14 and has a negative outlook on the rating, while S&P last downgraded in December but has the rating on credit watch negative (meaning a downgrade is imminent, if there is no material improvement). Read more

Spanish banks could be €50bn short of new capital requirements, says Moody’s, revising its previous estimate of €17bn based on old requirements. This is roughly 5 per cent of Spanish GDP and considerably higher than the Spanish government’s estimate of €20bn.

Overall savings banks’ exposure to the real estate sector is €217bn, by Bank of Spain data. Of that, €100bn, or nearly half, is considered “problematic”. €28bn are under surveillance and considered risky; a further €28bn are more than 90 days past due; and €44bn are foreclosed. Problematic indeed. The most troubling sentence from the Moody’s report is that just 40 per cent of the €217bn loan exposure is collateralised by finished, completed housing:

 Read more

As expected, Moody’s has downgraded Spain, three months after placing the sovereign on downgrade watch. Fitch and S&P downgraded Spain’s debt in late Spring, and S&P still rates Spanish debt below its peers.

Spanish debt is still rated above the rest of the PIIGS by Moody’s. PIIGS sovereign debt runs from Ba1 for Greece to Aa1 for Spain. Moody’s order runs: Greece, Portugal, Italy = Ireland, Spain. Fitch and S&P rate PIIGS’ sovereign debt in the same rough order, though at different levels. Click on the graphic to play with our interactive sovereign ratings graphic.

The current debt trajectory of the US may imperil the country’s future Aaa rating, Moody’s has said.

Steven Hess, senior credit officer at the ratings agency, told Bloomberg the US needed a strategy to tackle its deficit: “Having a clear plan certainly increases confidence and the U.S. doesn’t have that yet… the debt trajectory as it is now is something that might potentially cause us to consider whether the US is Aaa at some point in the future.” Read more

Ralph Atkins

Spanish banks have been lobbying the European Central Bank to act to ease the systemic fallout from the expiry of a €442bn ($542bn) funding programme this week, accusing the central bank of “absurd” behaviour in not renewing the scheme.

On Thursday, the clock runs out on the ECB financing programme – the largest amount ever lent in a single liquidity operation by the central bank – under the terms of the one-year special liquidity facility launched last summer. One senior bank executive said: “We are fighting them every day on this. It’s absurd.” Read more

Greece was so last month. As attention shifts to Spain, one argument runs that the country will receive greater concern from ‘core’ European countries than Greece. But why? Read more

** corrected at 16.40 to read “in the near future” instead of “next few days”

Spain’s central bank has thrown down the gauntlet to bank regulators elsewhere in Europe, saying it plans to publish the results of “stress tests” on the country’s financial institutions in the near future to clear up doubts about Spain’s banking system. (Berlin has also dropped resistance to the plan.) Read more

Attention is focusing on Spain. Dominique Strauss-Kahn – who’s in the region anyway, apparently – will take the opportunity to visit the country on Friday to discuss the economy with the PM.

Agenda items might include Spanish sources of debt, following a disappointing bill auction on Tuesday, highest government bond yield spreads since the mid-90s, and data from RBS showing that Spanish institutions’ net borrowing from the ECB is at an all-time high (see chart). Note that the Spain is bucking the euro area trend, which has seen total euro area net borrowing fall by a sixth since its April 2009 peak of €629bn. The white line shows Spain’s borrowing as a proportion: now at a high of 16.5 per cent. High borrowing from the ECB suggests Spain is struggling to raise debt at reasonable rates elsewhere.

Spain is tackling problems in its economy. A raft of austerity measures Read more

Ralph Atkins

Rage against rating agencies is rising. The latest to accuse the likes of Moody’s and Standard & Poor’s of simply making the crisis worse is Christian Noyer, France’s central bank governor, who usually avoids creating headlines.

Untimely downgrades – for instance of Spain by Fitch last week- were an “enormous problem,” Mr Noyer told a conference in Seoul, according to Bloomberg. Rating agencies were not just striking at the wrong moment. They were also failing to provide added value, Mr Noyer argued. “The fact that these decisions were taken at a certain point of time under the stress of markets seems to show that credit rating agencies are simply not giving information to markets but taking information from markets.” Read more

Simone Baribeau

The eurozone crisis rages on.

Fitch downgraded Spain’s debt ratings today, cutting the country’s long-term foreign and local currency ratings by one notch to AA+ from AAA. Read more

Spain came close to its first debt auction failure on Tuesday, highlighting the funding problems for weaker eurozone economies.

The government’s difficulties in selling €6.44bn ($7.96bn) in one-year and 18-month bills sparked worries over its 10-year debt auction on Thursday. Read more

Simone Baribeau

You can always hope.

As more details unfold about European austerity programmes, reports asked Charles Evans, Chicago Fed president, what the potential effects would be on the United States. According to Reuters, Mr Evans responded:

I’m hopeful that our exposure will be minimal to modest.

Being hopeful is one thing, expecting something to happen is another.

Of course, there are those that are far less hopeful (or is it expectant?) Read more

Apparently, the Spanish intelligence agency has been enlisted to help find out what is behind recent “speculative attacks” in the financial markets.

The Economic Intelligence Unit – created to defend the economic, commercial and industrial sectors in Spain – wants to know whether investors’ behaviour and “Anglo-Saxon media aggression” can be explained by market fundamentals, or whether something more sinister is behind the moves. Read more

Ralph Atkins

The economic news from Spain has turned more worrisome. Eurozone purchasing managers’ indices for manufacturing showed the region’s recovery humming along nicely (December’s final index reading at 51.6, up from 51.2 in November, was in line with the preliminary estimate released last month).

But Spain is heading in the opposite direction. Activity in its manufacturing sector continued to fall, and the pace of contraction in the fourth quarter Read more

Not to be outdone by its rivals at Fitch, who on Tuesday downgraded the sovereign rating of the Hellenic Republic of Greece, Standard & Poor’s on Wednesday revised its outlook on the Kingdom of Spain to negative from stable. The agency affirmed the existing ‘AA+’ long-term and ‘A-1+’ short-term sovereign credit ratings. Read more

Ralph Atkins

Spain’s central bank governor has revealed himself as a “gradualist” writes Ralph Atkins in a Financial Times blog Read more

Ralph Atkins

Construction spending is helping the German economy, but annoying motorists, writes Ralph Atkins of the Financial Times Read more