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Bank Investors Dismiss Moody’s Cuts as Years Too Late

Bloomberg - Jun 22, 2012

Moody’s Investors Service suffered a downgrade of its own as markets responded to the company’s rating cuts yesterday of 15 of the world’s largest banks by bidding up the value of their stocks and bonds.

Shares of all the firms affected by yesterday’s action rose as of 10:18 a.m. in New York, and the cost to protect Morgan Stanley (MS) debt against losses dropped to the lowest in more than seven weeks, according to data compiled by Bloomberg, after the bank was cut two levels rather than a threatened three grades. Credit-default swaps tied to Bank of America Corp., which was lowered to within two levels of junk along with Citigroup Inc. (C), also improved. The Bloomberg Europe Banks and Financial Services Index added as much as 1.5 percent.

“American banks are stronger today than they were three years ago,” said Gerard Cassidy, an analyst with RBC Capital Markets, adding that market prices have long reflected concerns raised by Moody’s. “Yes, their ratings are lower, but is Citi tomorrow going to have to pay an extra 50 basis points for commercial paper? I don’t think so.”

Read Full Article from Bloomberg

- Posted: 2012-06-22 11:12:48


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