Fitch Downgrades Spain To BBB and Bund Futures Rise

Spain (Photo credit: robynejay)

The bad news comes to Spain every day, adding to its tremendous economic crisis. In recent days, the government reported unemployment data, which show a further deterioration in relation to previous months. Also, industrial production has continued to fall and personal consumption slumped in May. Now, the Agency Fitch Ratings just cut Spain's long-term issuer rating to BBB from A. German Bund futures opened higher on Friday after Fitch's downgrade of Spain's credit rating by three notches heightened expectations that the country was close to asking for financial help to save its banks. At 0602 GMT, Bund futures were 39 ticks higher on the day at 143.45, with 10-year cash yields 4.1 basis points lower at 1.343 percent.

That's a three notch downgrade, leaving Spain just two notches above junk.

Further, it maintains a negative outlook for the creditworthiness of Spanish debt.

The ratings agency cites five reasons for the downgrade:

• The estimated €60-€100 billion cost of recapitalizing the banking sector.
• Upward revisions to the country's debt-to-GDP ratio to 95 percent of GDP in 2015.
• Recession forecast through 2013.
• Contagion from Greece.
• Increasing financing concerns for the Spanish government that will restrict it from taking strong action to assuage banking concerns...  Continue to read. 

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