FT Alphaville has more to say. And here is a flash note by Danske Bank. Edward Hugh has a nice overview here.
Suki Mann, the credit strategist at Societe Generale wrote in the "wrap-up" at the end of European trading yesterday:
They don't know what they're doing. It has to be said that policymakers have been flapping for a while as they throw the kitchen sink at a financial crisis that is without historical precedent. We’re no longer looking over the edge of the cliff, we’ve gone over it and while equities have been testing new lows, credit through the indices doesn’t yet see new wides. Sovereign CDS risk premia was on the up however with Austria (260/285bp, +15bp), Germany (90/96bp), France (90/98bp), Sweden (160/185bp, +10bp), the UK (164/174bp) and eastern European countries all at historical highs. Austria and Sweden widened the most after the Latvia rating downgrade/Lithuania and Estonia negative Watch actions. Through it all cash credit edged wider (non-financial corporates) while the subordinated cash financials universe remains unloved (but stable again today). Flows overall are light, activity poor and there is no liquidity as the shutters come down – again, as plummeting stocks leave the market shell-shocked. Or maybe month-end week does matter after all!
... there is much apprehension surrounding banking sector risk per se stemming from continued and escalating worries surrounding CEE market risk/exposures. And this could be another factor.
As to Latvia going forward? Well, in my view, the actions by Moody's are key, as they have rated the majority of Latvian banks. Moody's historically has assigned ratings by 1-2 notches higher than S&P. So, there is a hope (but no fundamental reason for it) that Moody's will cut, but still in the "investment grade area"? The move by S&P leaves no choice to Moody's, but to make a move too, and fairly soon... The worst in this scenario is that Moody's cuts into "junk status" too, and it MAY trigger Latvian banks to "repay early" the foreign syndicated loans... I have no clue, is government aware of that? And what about cross default clauses?
Obviously, those "two parties" that called the prime minister to step down should be responsible for the events unfolding now ...
The IMF consortia assistance in the current form was very much based on "political commitment" that is very questionable now after the resignation of prime minister.
Well, the president has promised to name the new prime minister tomorrow. But it does not change the parliament ...
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