GERMANY'S CREDIT RATING TEMPORARILY DOWNGRADED
Somehow a tranche of German debt, considered one of the safest debts in the world, was downgraded by S&P. S&P was one of the three main credit rating agencies that contributed to the current financial crisis by rating junk as AAA. So it is in on the scam.
But why would S&P downgrade German debt?
As a warning, "Hey Germany, look what we can do. We've rated junk as AAA before so we can rate AAA as junk...whenever we want. Waddya gonna do about it?".
Germany is driving to ban derivatives in Europe, and is gaining some support. I think Bilderberg Osborne opposes the move, and Deutsche Bank under Bilderberger Josef Ackermann does too, ignoring its own governemnt and gambling on shorting Spain and Portugal.
Red faces at S&P as agency strips Germany of 'AAA' rating - for a minute
Things have got bad but, really: that bad? For a moment on Friday, markets were forced to think the unthinkable as an error briefly stripped one of the world's most reliable sovereign nations of its triple-A credit rating.
By Edmund Conway
Published: 6:39PM BST 11 Jun 2010
Standard & Poor's temporarily removed the AAA rating from a slice of Germany's national debt, before issuing a humiliating correction.
The clerical error is all the more ironic because not only has Germany held the top credit rating since S&P started monitoring it in 1983, it is regarded as one of the safest bets in the world, with one of the lowest credit default swaps of all sovereigns and a smaller budget deficit than any other G7 economy.
And yet for a moment, S&P's ratings service withdrew the AAA rating on a tranche of €24bn (£20bn) of 3.75pc German Federal 2019 notes. The agency explained that it had incorrectly entered the maturity date for the note, describing this as an "administrative error". It added: "We have corrected and reinstated the 'AAA' issue rating on the tranche of notes."
Such errors are not unheard of since S&P has ratings on a mind-boggling number of different debt issues, however with so much attention currently focused on sovereign debt issues, the mistake raised eyebrows. However, the rating change did little to distort the price of German debt, despite the fact that many traders are thought to integrate ratings agencies' grades into their models. As it happened, German bond yields improved slightly yesterday, affected by US retail sales data.
The mistake may prompt further questions about the accuracy and reliability of the ratings provided by S&P, Fitch and Moody's, whose judgements on sub-prime debt ahead of the crisis are agreed to have contributed to the ultimate implosion. The agencies' recent downgrading of Greece's debt pushed the country further towards insolvency. They are currently weighing whether to downgrade Britain, which faces one of the biggest deficits in the western world but is imposing spending cuts.
Germany's rating, it should be added, is not considered at risk.