ATHENS, Greece -- Moody's Investors Service slashed Greece's credit rating to junk status on Monday in a new blow to the debt-ridden country that is under intense international scrutiny after narrowly avoiding default last month.
Moody's must have discovered some previously secret facts about Greek debt in order for it to lower Greece's debt by 4 notches. Either that or they got around to reading the newspapers from January.
You got to admire how Moody's and the other ratings services are so on top of the Greek sovereign debt situation. With a downgrading like this you might begin to think that Greece will have a hard time raising money on the capital markets, what with the capital markets now apprised of Greece'e debt problem. Maybe European governments might try to get together to do a bail-out. Or maybe credit default swaps in Greek debt will soar in price. Oh wait. That already happened weeks and months ago.
Why do credit ratings agencies still exist? Anyone know? Do they have some carefully concealed purpose? Their predictive powers are a joke.
Greek credit swaps signal a 48.5 percent probability the nation will default within five years. The cost of insuring $10 million of Greeceís bonds for five years jumped $55,500 to $811,000 a year, making the nationís debt the third most expensive to protect after Venezuela and Argentina, according to CMA DataVision.
I think Greece has a near 100% probability of default. So even the credit default swap prices seem to underestimate the odds of default.
|Share |||By Randall Parker at 2010 June 14 11:30 PM Economics Sovereign Crises|