Will S&P Ratings Cut Finally Push Spain Into a Bailout?

Where's Our Bailout? protest (Photo credit: Toban Black)

 Berlin, Oct. 11, stock picks .-  Standard & Poor's decision to cut Spain's credit rating to one notch above junk status is weighing on markets, but analysts see a silver lining here — it could push a reluctant Madrid into asking for a bailout and thus alleviate pressure on its borrowing costs. “Spain has been dragging its feet and the potential positive outcome from the S&P downgrade is that Spain could come to the table faster because markets are likely to put pressure on the bond market again,” said Ray Attrill, global co-head of foreign exchange strategy at National Australia Bank in Sydney.

S&P cut Spain’s sovereign credit rating for a third time this year, moving the long-term rating to BBB-minus with a negative outlook, citing a deepening recession that limits Spain’s options to bring its economy back on track.

The news that came out late on Wednesday knocked the euro [EUR=  1.2923   0.0049  (+0.38%)   ], which fell to its lowest level since Oct. 1, and was expected to put pressure on Spanish bond prices when European markets open later on Thursday.

Both S&P and rival ratings agency Moody’s now have Spain’s ratings one notch away from junk status, a level that would imply an increased possibility of a debt default and prompt investors to ask for a higher rate of interest for holding risky Spanish bonds.

Moody’s is expected to come up with its latest update on Spanish ratings sometime this month. ... Continue to read.

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