Moody's 'axe blow' to rating on Spanish debts(another time bomb ticks in EU)

Telegraph ^ | 12/18/09 | Ambrose Evans-Pritchard

[TigerLikesRooster]

Moody's 'axe blow' to rating on Spanish debts

The debt crisis sweeping southern Europe has deepened after US credit-rating agency Moody's downgraded €112bn (£100m) of Spanish mortgage debt and slashed the ratings of Catalunia and a raft of regions with ballooning state deficits.

By Ambrose Evans-Pritchard, International Business Editor

Published: 6:05AM GMT 18 Dec 2009

A deserted buiding site in Spain. The country has been hit hard by the property crash

Spain's media called the move an "axe blow", fearing a domino effect through the country's debt markets. Credit default swaps measuring the risk on Spanish sovereign bonds jumped 10 basis point to 101 yesterday.

Moody's downgraded a third of the entire stock of Spanish mortgage bonds or "cedulas" – covered bonds deemed safer than US sub-prime securities – but also made from debt that is sliced into packages. Most were cut from AAA (Aaa) to Aa1. They are largely owned by German or French banks and pension funds.

The agency said the Spanish savings banks that issued the bonds are heavily exposed to Spain's property crash. Moody's said it had based its stress test on assumptions of a 45pc fall in house prices.

[TigerLikesRooster]

EU’s current ticking time bombs:

one on the Eastern edge: Greece

the other on the Western edge: Spain

Germany stuck in the middle trying to plug holes on EU’s both ends.

[Wolfie]

Moody’s? Anybody consult a Magic 8-Ball, too?

[Petronski]

The PIIGs are going to pull Europe into the ditch (or worse).

PIIGs:

Portugal
Italy
Ireland
Greece

[Petronski]

Whoops, I forgot Spain.

The term is PIIGS:

Portugal
Italy
Ireland
Greece
Spain

And they’re all in the shit.

[dennisw]

this is hurting the Euro of course.... USD is up against the Euro today and gold is up too

usual for months was Euro up against USD and gold up

[dennisw]

PIIGS countries in trouble also known as the garlic belt (except Irish don’t like garlic)

[Professional]

There is still so much leverage going on with hedge funds, it is very difficult to spot the differece between reality and speculation. Clearly though, after the euro’s rise of 65% against the USD since 2000, that makes for very difficult business conditions.

[bruinbirdman]

"The PIIGs are going to pull Europe into the ditch (or worse). PIIGs: Portugal Italy Ireland Greece "

Interesting, dude on the tube noted that Greece with a GDP of 3% of EU has the same credit rating as Kalifornia, 16% of US GDP.

yitbos