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A "stunning" ratings reversal for CMBS

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.

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