The Wilder View

Did You Know? S&P PIIGS Ratings Edition

With the two-notch downgrade of Spain to BBB- by by S&P (link and link), I figured that this is as good a time as any to start a series called “Did You Know?”. Let’s start with the S&P’s ratings edition and a chart featuring the ratings migration across the periphery economies Greece, Ireland, Italy, Portugal, and Spain (GIIPS).

Did You Know?

Did you know that Ireland and Spain were once rated AAA? For Ireland, Oct 2001 to March 2009; and for Spain, Dec 2004 to Jan 2009.

Did you know that Greece was at one time rated A+? June 2003 to Nov 2004.

Did you know that the average credit quality across the GIIPS is currently BB+? According to S&P rating definitions, that’s below investment grade quality (so-called junk).

Even without Greece, did you know that the average credit quality of the IIPs is BBB- and borders junk status?

Did you know that S&P never downgraded all 5 PIIGS credits in one month? In January 2012, S&P downgraded Italy, Portugal, and Spain by 2 notches each to BBB+, BB, and A, respectively.

Did you know that S&P downgraded Greece to SD, or selective default, for 3 months in Feb 2012? Greece is currently CCC and was upgraded from SD in May 2012.

Rebecca Wilder

Note: The rating data are from Bloomberg.

3 Responses to “Did You Know? S&P PIIGS Ratings Edition”

princess1960October 11th, 2012 at 5:58 pm

i know what is to day ..all this countries is deep in crisis ANDDDD FOR LONG TIME WILL NOT GO OUT …
thank you

klhoughtonOctober 11th, 2012 at 6:52 pm

Look at the Current Account Balances for Spain certainly (and Ireland probably) through, say, mid-2008 and tell me that the former isn't a AAA credit, while the latter was at least AA/AA-.

Both had private-sector mortgage excesses, but that was to be expected due to their EUR participation. (Same as Bostonians owning property in NH or VT, or NYCites who keep a place in the Catskills or the Poconos.)

There are a lot of bad agency calls, but if you don't assume the public sector is going to pay–let alone pay in full–for the G/e/r/m/a/n/ b/a/n/k/s/ private sector's lending excesses, it would be impossible not to rate Spain (budget surplus, fiscally responsible) at AAA and Ireland (solid economy, growing manufacturing sector to go with their Service-Sector-Friendly corporate tax rate.)

Rebecca WilderOctober 11th, 2012 at 8:36 pm

The rating agencies put each EA sovereign under the umbrella of the ECB, a credible central bank. Thus the ECB is to Ireland or Spain as the Fed is to the US. This was a mistake, because as we know, Irish bonds denominated in euros are more like debt denominated in a foreign currency than US sovereign debt, which is mostly denominated in dollars (domestic currency). To be sure, the ECB has definitely stepped up the liquidity, and markets expect it to backstop the sovereigns – but the distinction is important..

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