U.S. markets pared their gains in late morning and on into the afternoon, after Moodys Investor Services analyst Sarah Carlson downgraded Greece’s sovereign debt rating to “junk” status, Ba1, from a prior rating of A3, and downgraded the country’s “short-term issuer” status to “not prime” from “prime.”
Europe’s and the International Monetary Fund’s bailout package for Greece removes the near-term risk of default, says Carlson, but “the macroeconomic and implementation risks associated with the programme are substantial and more consistent with a Ba1 rating.”
New austerity measures put in place could stabilize the country’s debt at 150% of GDP by 2013, believes Carlson, however “There is considerable uncertainty surrounding the timing and impact of these measures on the country’s economic growth.”
The move follows exactly the same action by Standard & Poor’s and Fitch Ratings back in April.
Credit Default Swaps on Greece’s debt were stable at around 720 basis points earier today.
The Dow Industrials seem to have stabilized at a gain of around 60 points, at 10,272, after rising as high as 10,328 earlier in the session.
European markets, which closed before the ratings action, were up for the day, with the FTSE 100 index rising 0.7% to 5,202.
The folks at Markit inform us this afternoon that Greek CDS were trading at 740 late in the day, Europe time, which was 13 basis points tighter than on Friday. But the London sovereign desks were closed before the ratings action, so they really don’t reflect the cut.
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