Instant view: S&P warns of possible downgrades to 15 euro zone
Standard & Poor's on Monday warned it may downgrade the credit ratings of 15 euro zone countries as the region's debt crisis deepens.
COMMENTS:
CARLEY GARNER, SENIOR ANALYST, DECARLEY TRADING, LAS VEGAS:
This isn't an official credit downgrade, but it is a not so subtle warning to European nations that they must work toward getting their house in order.
Naturally, the headline didn't offer traders any new perspective or give them anything that wasn't already known, but it didn't seem to matter. All the market needed was a reminder as to why Treasuries have been perpetually high in recent months and this piece of news delivered.
CARY LEAHEY, MANAGING DIRECTOR AND SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK
You can argue it's a lagging indicator of the consensus but it is a negative. It includes countries up to and including Germany. Germany might be a bit of a surprise because it has a sterling credit rating. But one thing Germany is worried about is whether, if they share the financial burdens of some of their financial partners, their own credit standing will suffer. In the case of Germany the loss of a AAA credit rating might not mean the loss of Merkel's career. But Sarkozy might be more vulnerable in France.
WILLIAM LARKIN, FIXED INCOME PORTFOLIO MANAGER, CABOT MONEY MANAGEMENT, SALEM, MASSACHUSETTS:
We were running on some good news for a couple of days so we were about due for something negative. This is like kicking somebody when they are down. I don't know how much of this is priced into the market. It looks like we are not getting a big reaction on the 10-year (Treasury note) right now, but the European market is closed.
The most important thing going forward right now is that yields on these bonds remain in the current range -- they seem like they are trending down, which is a positive for everybody involved. Part of this is probably priced in, or even the majority of it, but we will find out tomorrow.
FRED DICKSON, CHIEF MARKET STRATEGIST, THE DAVIDSON COS., LAKE OSWEGO, OREGON
At this point I can't say anybody would be surprised. All of these governments have fairly significant debt as a percentage of their GDPs. They have debt levels relative to their GDP in the same range as the U.S. or slightly higher. All I can say is what took them so long.
It's the first yellow flag that it could happen across the board. Anything that seems like a little bit of bad news causes a little bit of a sell-off.
DAN FUSS, VICE CHAIRMAN, LOOMIS SAYLES, WHICH OVERSEES MORE THAN $160 BILLION IN ASSETS
It would bring the top six in line with the United States. When you look at the underlying factors here, Are these really better credits than the U.S.? No. Not by a long shot.
JACOB OUBINA, SENIOR US ECONOMIST, RBC CAPITAL MARKETS, NEW YORK
I don't think it should surprise anybody. From my perspective this was a long time coming, given all the issues and given the fact that they've made very little headway on the crisis.
We got a pretty significant leg down in Treasury yields when the rumors started circulating about an hour ago.
If Germany gets knocked down, and that looks highly likely, Treasuries (yields) are going to break back down to their recent lows. It's going to be tough to get down past the 1.90 percent (10-year yield) level.
It's an interesting week for this to happen. The U.S. is incredibly slow this week, with data and Fedspeak, so all eyes are on Europe and this has the potential to have even more of an impact this week than it would have perhaps last week.
BRIAN DOLAN, CHIEF STRATEGIST, FOREX.COM, BEDMINSTER, NEW JERSEY
I still think the ratings agencies suffer from a credibility deficit. That said, we know Europe is facing a dire situation here and this action seems appropriate. Ultimately, it may be S&P signaling to the EU this is it, that they've got to get something done now. If they are trying to send a message, now is a good time. This should weigh on risk sentiment. I'd be surprised to see European equity markets rally tomorrow. As for the euro, there's some magic support keeping it up. There's enough optimism that Europe will do something this time, so euro sellers are pretty nervous.
MARKET REACTION:
STOCKS: U.S. stock index futures slip
BONDS: U.S. Treasury debt prices were little changed
FOREX: The euro edges slightly lower versus dollar
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