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FITCH RATINGS downgraded Hungary’s credit grade to junk status today, citing a standoff between the country and the EU and the IMF over rescue loans.
Fitch, which followed similar moves from Moody’s and S&P, kept a negative outlook, indicating a more than a 50 per cent chance for another downgrade within the next two years.
The decision to cut Hungary by one notch, to BB+ from BBB-, was triggered partly “by further unorthodox economic policies which are undermining investor confidence and complicating the agreement of a new IMF-EU deal,” said Matteo Napolitano, Director in Fitch’s Sovereign Group.
Hungary late last year requested financial aid from the EU and the IMF. But the two institutions broke off preliminary negotiations amid concerns over new laws they fear could hurt the independence of Hungary’s central bank.
Government spokesman Andras Giro-Szasz said the downgrade was “surprising” considering statements from Prime Minister Viktor Orban and Tamas Fellegi, Hungary’s chief negotiator in the IMF-EU talks, confirming the country’s intention to soon reach an agreement with the international creditors and the government’s insistence about its support for the independence of the central bank.
This morning, Orban met with National Bank of Hungary President Andras Simor and the government’s top economic officials.
Orban dismissed market speculation that the government was planning to tap central bank reserves to support the state budget and said the government would do everything in its power to support the central bank’s efforts to stabilise the economy.
Hungary’s currency, the forint, fell to all-time lows for two consecutive days this week. Yields on some government bonds jumped more than 2 percentage points in just a few weeks, as investors fretted about the uncertainty over the IMF deal and the government’s economic policies.
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Whats lower than Junk Status?
Laughing stock status
Ireland
Any chance someone can downgrade these rating agencys or do something to p.ss them off. They need to get their comeupence big time. Acting like their gods rating this rating that. Arrrrrg. Off with their heads.
BBB- to BB+? I think there might be too many grades, especially if “Junk” status kicks in half way through the table.
So what!..
Someone really needs to take out these see you in tea rating agency people with a silver bullet. Where are Anonymous when you need them. Would love to know who has the final say on signing off on these proclamations of ‘junk status’ and what these scum whores gain by it?
Think I said this before, if we are all downgraded then we must be all at the same level, so what’s the problem, same playing field. Maybe I’m thick!
rating agancies are so important to investors in assessing fixed income investments…they rate bonds on 2 main points 1: the likely hood that an investor gets the principle amount of an investment back 2: the likely hood that an investor will receive their coupon…we need rating agencies fact!!!!
Yeah thats why sub prime mortgages were rated triple A by these agencies.
derek they did get it wrong with sub prime, but they were bundled up in such a way that at the time of rating they were investment grade. What they did not do was correlate the effect that one foreclosure would have on the others in the bundle. Thats besides the point anyway if you ever invest in bonds you would demand a rating therefore we need rating agencies!
“ratings agencies are so important for assessing fixed income investments”
So the question your asking is do we need fixed income investments that have proven themselves to be rubbish anyway.
I suspect you might be an industry insider blinkered by the bull.
We don’t need this form of credit based amoral capitalist claptrap bullshit. It evidently doesn’t work. People were convinced from the sixties to the eighties that everything would continually improve. Then they stated to realise they were being conned. Ratings agencies are a,legacy of this grand fraud.
“So the question your asking is do we need fixed income investments that have proven themselves to be rubbish anyway.” First fixed income have not proven themselves to be rubbish! A sub prime mortgage bundle is a CDO(Collateralized debt obligations) which is a type ABS(asset backed security) these a derivative instrument.i.e value derived from the underlying value of a contract. Secondly its not a “con”, Bonds are a method of borrowing. This allows companies to grow and countries and municipalities to run. A bond is where you borrow from investors rather than a bank. Investors receive a coupon payment each year for their money. For an investor to work out a sufficient coupon rate they rely on ratings agencies! So again rating agencies are an important part of global finance. Comments are seemingly only liked if they follow national sentiment i.e Anarchy!
Cian,
To me the problem seems to be the great doubts being shed over the independence of these agencies and therefore the reliability of their information. The agencies themselves say that their ratings are opinions based on fact, nothing more. However when you add to this the fact that they are paid by some of the people they are rating then their credibility is at issue. What is needed is a ratings agency that is independent, international and funded equally by subscribing nations so no one nation is seen to have more influence than another. This could perhaps be done under the auspices of either the World Bank or the UN.
What The Journal needs to do along with other media is to ignore anything issued by the Big 3 Credit ratings. They got it wrong in 2008 and they continue to get it wrong. Not only, companies (as opposed to countries) pay to get their debt rated. One presumes that national debts are owned by institutions and you can see that things are a little too cosy.
BBB : medium class companies, which are satisfactory at the moment (presume that the can sub countries for companies)
So all the talk about cutting their rating sounds like a disaster when in fact Hungary is still “satisfactory at the moment”
Yawn…
You never hear of countries being upgraded sadly…
have your say