Following the S&P "technical glitch" on Thursday which sent out a bizarre notice to a few subscribers notifying that a rating action on France is imminent, FrAAAnce is up in arms and demanding S&P blood. The reason: as everyone knows by now, the sanctity of the Eurozone is now contingent on those three A letters more than any other variable, because without said rating, France becomes ineligible for EFSF funding purposes (at any rating less than AAA), the EFSF's sole 'pristine' backer becomes Germany, and sends the EFSF yield curve into a tailspin, as it glaringly painfully obvious that Germany alone can't fund the trillions needed to preserve the Eurozone and purchase rolling Italian and other PIIGS debt. Yet one look at the yield curve of the EFSF as it already stand confirms that the market is not waiting for S&P, Moody's or any other rating agency, as it is now just a matter of time: after all recall that S&P itself said that it "would likely downgrade the credit ratings of France,
Spain, Italy, Ireland and Portugal if the euro zone slips into another
recession." Well as of yesterday, the EU itself warned the Eurozone may slump into "a deep and prolonged recession."The result: as of the past few days the EFSF no longer trades with an AAA implied rating. In face as can be seen on the chart below analyzing regression curves for various rating strata, the EFSF is now AA+ at best. Simply said, this means that the bond market has once again voted, and completely oblivious of the noise that is the puppet changes at the top in Italy and Greece, is already preparing for the next contingency casualty, which after France, is just one... at least in Europe.
And here is the salient section from the S&P October 20 Eurozone "Stress Test" - the bolded text is all that matters:
Sovereign ratings on France, Spain, Italy, Ireland, and Portugal likely would be lowered by one or two notches under both scenarios.
ZeroHedge
Spain, Italy, Ireland and Portugal if the euro zone slips into another
recession." Well as of yesterday, the EU itself warned the Eurozone may slump into "a deep and prolonged recession."The result: as of the past few days the EFSF no longer trades with an AAA implied rating. In face as can be seen on the chart below analyzing regression curves for various rating strata, the EFSF is now AA+ at best. Simply said, this means that the bond market has once again voted, and completely oblivious of the noise that is the puppet changes at the top in Italy and Greece, is already preparing for the next contingency casualty, which after France, is just one... at least in Europe.
And here is the salient section from the S&P October 20 Eurozone "Stress Test" - the bolded text is all that matters:
Sovereign ratings on France, Spain, Italy, Ireland, and Portugal likely would be lowered by one or two notches under both scenarios.
ZeroHedge
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