You may have read about the sudden ratings reversals from Standard & Poors on commercial mortgage-backed securities (CMBS). I tweeted about this last night when I noticed that Bear Mountain Bull, Prudent Investor, and I were all following this story.
It seems the recently downgraded bonds, which were marked down to a BBB- rating (lowest investment grade, a notch above junk status) by S&P on July 14, have now had their AAA luster restored with a quick reappraisal of their investment potential and a "stunning reversal" of that recent downgrade.
Toni Straka at Prudent Investor shares the details:
"Rating agency Standard & Poors (S&P) appears to do all it can to further wreck its status.
According to a Bloomberg story from Tuesday S&P had downgraded three AAA-rated commercial mortgage-backed debt papers only a week ago to BBB-, the lowest investment-grade rating. Lower ratings than BBB are considered junk issues.
On Tuesday S&P reversed course and upgraded the bonds again to AAA in a move destined to downgrade its own reputation.
The move coincided with new proposed legislation sent to Congress that would require rating agencies to observe a raft of new disclosure rules and restrictions, writes the Financial Times."
We're back to AAA baby; now those CMBS are TALF-ready! Check out the links above for more info on how the ratings agencies (and government-assisted bond investors) do business these days.
Wednesday, July 22, 2009
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Update - FT: "S&P flip flop causes confusion in CMBS market".
Ok, we all hoped that Treasury would not extend a tentacle to reign in S&P who had apparently had a moment of rater's remorse. But, it obviously happened, and, notwithstanding S&P's attempt to fire a shot across congress's bow, S&P wants to play ball given the escalating intensity of congress's desire to "get" those responsible for the bubble (and of course make sure it never happens again-any bets here?)
Thanks Charles,
Yeah, not too sure what's going to become of the ratings agencies. It certainly was convenient of S&P to overturn their BBB- ratings back to AAA to coincide with the new govt. plan.
Actually, looking on Stocktwits right now & someone just suggested they scrap the agencies & replace them w/ Consumer Reports :)
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