Tuesday, January 17, 2012

Draghi Questions Role of Ratings Companies

Bloomberg
January 17, 2012

European Central Bank President Mario Draghi said investors largely priced in the euro-area sovereign downgrades from Standard & Poor’s and questioned the importance of ratings companies.

“I will never comment on ratings as such, but certainly one needs to ask how important are these ratings for the marketplace overall, for investors?” Draghi said late yesterday at the European Parliament in Strasbourg. “It seems to a great extent markets have anticipated these ratings changes and priced them in. We should learn to do without ratings, or at least we should learn to assess creditworthiness” with less reliance on the ratings companies, he said.

S&P stripped France and Austria of their top ratings on Jan. 13 and cut seven other euro countries in a move that left Germany with the bloc’s only stable AAA grade. Efforts to combat the region’s debt crisis are falling short, S&P said. The company last night also removed the AAA grade of the European Financial Stability Facility, which is designed to fund rescue packages for Greece, Ireland and Portugal.

Investors shrugged off the S&P moves. France sold 1.895 billion euros ($2.4 billion) of one-year notes yesterday at a yield of 0.406 percent, down from 0.454 percent on Jan. 9. The Treasury sold a total of 8.59 billion euros in bills, including three and six-month paper. Yields fell on both.

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