IT’S A SURE sign of a disjointed market when investors welcome news of a sovereign downgrade.
But that’s exactly what happened when, as 2009 drew to a close, Moody’s Investors Service cut its rating for Greece by just one notch, from A1 to A2. In previous weeks, both Fitch and Standard & Poor’s had placed Greece at the triple-B level. Moody’s maintenance of that one single-A rating meant that Greek government bonds would still be acceptable as collateral at the European Central Bank – crucial for the country’s banks as they coped with liquidity concerns and a fast-deteriorating economy.
Investors breathed a sigh of relief. Government bond prices jumped and the stock market rose. Hopefully, the worst of the news was out of the way – and Greek banks could start to look forward.
That process actually began in...
