S&P Sees Record Number of Bond Downgrades

Posted on June 25th, 2008 in Daily Mortgage/Housing News - The Real Story

I have written enough about bond downgrades, issuers and insurers for an entire lifetime and it keeps on coming!

Today S&P said it sees a record amount (749) of bond ratings downgrades coming soon. Issues at risk are investent grade raging from AAA to B-. Below are more recent stories on Bonds, the insurers and the big mess in which this space finds itself. -Best Mr Mortgage

More Mr Mortgage Related Stories

6/23 – Bond Downgrades May Soar, ‘We Have Yet to Scratch the Surface’ 

6/23 – It’s All Unraveling – Bond Insurers Beg Big Banks for $125 Billion Forgiveness

6/19 – Mr Mortage May CA Home Sales Report- Market Worsening

13 Responses to “S&P Sees Record Number of Bond Downgrades”

  1. If I am right, this is not good news for my pension fund ? It makes me laugh and cry, when I hear some of these pension managers talking about the fundemental security of bonds. 🙁 You would hear the same comments about mortgage debt. Strange. In 10 years these geniuses managed to transform even good stable investment vehicules into pure junk. You have to cry when you see this, because you know it means goodbye and adios to a retirement. Work till you croake. 🙁

  2. It would be nice to have a bond-implode-o-meter.

    It’s scary how the financial press doesn’t cover well the oil that grease the economy and the stock market. Oil and bonds. If there is one bubble left standing, it’s the bond market, nor oil. All these downgrades should increase the interest rates consideraly. That’s why the FED and central bankers don’t matter.

  3. dude, suppose you are 30yrs old, you have 30more years to long your pension…

  4. Mr. mortgage, I have aproposal, besides shorting finance and real estate, can we discuss dividends growth opportunity? We all know this crisis is not going to be over in years, however, we can not stay on the short side forever…

    I will contribute some picks soon.

  5. The problem I see with bond downgrades is that once the quality of the asset is impaired by downgrading, some mutual funds and Insurance companies holding these assets will have to sell them. Insurance companies are rated to and if a rater feels the quality of assets are low it may hurt the insurers rating as well as liquidity of the asset factored in. Risk managers require insurance companies to have minimum ratings and a rating drop will send out notices that your insurer no longer meets thier criteria.

    In the case of mutual funds/pension funds that have a balance set in the charter as a % of stocks verses bonds, if the bond side loses money, they will have to sell stocks to bring the bond side of the holdings back up. If they have set guidelines as to asset quality and the bonds fall outside of that they have to sell which if everyone has to sell at once will not be pretty. So as a side issue it will hurt the stock market.

    Moving right along, as the continued slide in property tax revenue falls and the velocity of money slows, state tax will take a big hit and start to bring on deficits and rating problems with State and county etc. I know that is thinking a little ahead right now but is coming so be prepared as we move forward.

  6. Ahead Dave ? It’s already happening. It’s just that it is not making the headlines. The mechanic of delevaraging is already in place. It means much higher taxes and/or deep spending cuts. Probably both. As usual, it will be happening at the worst of times.

    You should be lowering taxes when times are bad and hiking them to build a cushion when times are good. You have to modulate. The problem in the USA is that your short sighted politicians lowered taxes, on a permanent basis when couldn’t really afford it. You did it with borrowed money, not only that, with foreign money. What a mess indeed.

  7. Marc, Excuse me but this is the United States, your implying that there should be some kind of logic and sound monetary policy in play… the Fed policy is that full employment over rides sound monetary policy and the patient should live with no pain so open the faucet and fill the syringe. The housing bubble was our last hurrah. The Fed is now immobilized because they cannot raise to fight inflation or save the dollar without killing the bond market further and increasing the housing bust.

    The exported dollars will come home to buy our industry (what little we have) and turned into real property as America goes on sale. They have no other way to protect those dollars from getting ravaged.

  8. The U.S. economy grew at a slightly faster pace in the first quarter than originally reported, while inflation also was stronger than estimated at a “CORE” rate of 2.3%, the Commerce Department said Thursday in its final revision to gross domestic product estimates.The nation’s real GDP was revised to a 1.0% annual rate in the first three months of the year, up from an originally reported reading of 0.9%.

    Man you gotta love these govt departments, 2.3% core inflation, like people dont eat and use energy!! baah, inflation is running rampant right across the world and the fed is keeping rates below “CORE” inflation levels even. Mind boggling!!

  9. Well today you are getting neither.

    Increase in inflation big time and increase in unemployment big time. The FED policies are not working. STAGFLATION. Yeah the FED policies are rotten to “core”. Besides that the markets are not listening to central bankers. Rates in the free market, are going higher and bonds are going down.

  10. 7500 Countrywide employees receiving pink sheets.

    GM going down the way of the dodo as Ford and Chrysler.

    OPEP president saying that if Israel ever bombs Iran that the price had a good chance of going to 400$.

    Hey it’s a great day for the shorts. I will tell when I will become bull. It will happen when somebody gets rid once and for all of Cramer. Not before.

    It’s my ultimate contrarian indicator. I am surprised that this guy hasn’t received treats or somebody hasn’t made attempts. Really surprised. He must have good protection from the mafia. So Cramer was bullish yesterday ? You see. Hey Jim Cramer, this corrupt moron, next week will be recommending banks and cars.

  11. WOW ! This is fantastic news ! Way to go GM !
    Hummer is hot hot hot hot hot hot !

    Fitch Cuts Issuer-Default Ratings
    Of GM, Chrysler
    June 26, 2008

    Fitch Ratings cut the issuer-default ratings of General Motors Corp. and Chrysler LLC one notch further into junk territory and said downgrades of Ford Motor Co. and Ford Motor Credit Co. are also likely.

    Fitch warned that Chrysler’s issuer-default rating could be lowered two more notches from the current B-minus to CCC — nearly default status — if problems with rising loan delinquencies and losses on auto loans trickle down to retail volumes. Fitch’s Web site defines the issuer-default rating as reflecting the ability of an entity to meet financial commitments on a timely basis.

    Fitch, a unit of Fimalac SA of Paris, said a decline in sales in the overall minivan segment — an important product for Chrysler — has blunted the positive effects of the company’s redesigned minivan and the new Dodge Journey crossover and Dodge Ram pickup.

    Chrysler’s product pipeline for the near future is “relatively modest,” the ratings company said. But it noted Chrysler’s product pipeline “is relatively modest, indicating that the Auburn Hills, Mich., company’s lineup may remain misaligned with the market.”

    As with Chrysler, Fitch cited a cash drain as a major reason behind cutting GM’s rating, also to B-minus. It also called the auto maker’s lineup misaligned with market demand. Further downgrade is predicated on whether GM’s cash holdings fall below $15 billion, its ability to refinance short-term debt and if the Detroit company has to further support GMAC LLC, its 49%-owned credit arm.

  12. The biggest bond downgrader; INFLATION !

    Crude oil up 43%
    Ethanol up 21%
    Heating oil up 44%
    Natural gas up 77%
    Unleaded gas up 40%
    Cattle up 1%
    Corn up 59%
    Soy beans up; 26%
    Wheat down 2%
    Coffee up 6%
    Aluminum up 33%
    Copper up 26%
    Platinum up 33%
    Gold up 6%
    Silver up 13%.

    That and the credit crisis. A perfect cocktail.

  13. What will these bonds be worth at 200$ oil or 300$ oil ?

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