from FX Street (Córdoba) – The rating agency Egan Jones announced Wednesday it downgraded Spain sovereign debt from B to CCC+ and keeps a negative outlook, suggesting more downgrades could be ahead.

This is the second downgrade in two weeks. Egan Jones had cut Spanish rating on May 29 from BB- to B.

“With Spain bond as Junk by Egan Jones, do you expect Spanish 10Y borrowing cost climbing above 7% tomorrow? remember 7% is the frontier”, says Mauricio Carrillo, analyst at FXstreet in his Twitter account.

Continue Reading…

from Zero Hedge

And so the final Spanish A rating tumbles. Why is this kinda, sorta a big deal? Because as we explained in the end of April, “If all agencies downgrade Spain to BBB+ or below, the ECB could increase haircuts by 5% on SPGBs. The key aspect in terms of the Spanish downgrade(s) is the ECB’s LTRO. If all three rating agencies move Spain to BBB+ or below then under the ECB’s current framework it moves into the Step 3 collateral bucket which requires an additional 5% haircut across the maturities. In classifying its risk management buckets, the ECB uses the highest of the ratings to determine an asset’s position (unlike the sovereign benchmark indices which use the lowest rating, in general). Fitch and Moodys currently rate Spain at A and A3 respectively, with both having a negative outlook in place leaving only a small downgrade margin before Spain migrates to the lower ECB bucket.”

Continue Reading…