FITCH - UK Most At Risk To Lose AAA Rating

inspector_monkfish

09:33 10Nov09 UK TRADE MIN: AAA RATING "ABSOLUTELY" SAFE
09:33 10Nov09 UK TRADE MIN: GOVT TAKING ACTION ON DEFICIT REDUCTION
09:50 10Nov09 UK Trade Min: AAA Rating "Absolutely" Safe



LONDON--The U.K. government's credit rating is "absolutely" safe, despite a warning earlier from Fitch Ratings that Britain is the major economy most at risk of losing its AAA status, U.K. Trade Minister Mervyn Davies said Tuesday.

Gilt prices gave up ground and sterling dropped sharply against other major
currencies early Tuesday over fresh concerns about the U.K.'s ballooning budget deficit.

Earlier, David Riley, Fitch's co-head of global sovereign ratings, said the
U.K. was "potentially most at risk" of a downgrade "given that if faced the
largest budget adjustment."

But he added that the U.K.'s current stable rating outlook "reflected our
expectation that the U.K. government will articulate a stronger fiscal
consolidation program next year."

In an interview with Dow Jones Newswires, Davies said that the AAA rating is secure.

"I think that the government's been very clear that over the next four years
there's going to be a program to reduce the public debt level," he said. "There's
a huge amount of positivity about this country and this economy. But as a result of the banking crisis and other things, we've got to take some action" on the debt.

Prior to Davies' comments, the pound tumbled from $1.6750 against the dollar to the day's low of $1.6605. The euro spiked from GBP0.8940 against the pound to the day's high of GBP0.9018.

U.K. government bonds, or gilts, also opened lower on the news. At 0849 GMT, the December Gilt contract was trading at 116.66, down 0.12 on the day. That marked a clear underperformance relative to the December contract for German bunds, which was trading at 121.37, up 0.04.

The cost of insuring U.K. sovereign debt against default for five years rose
slightly following the Fitch comments. According to CMA DataVision, the U.K.
five-year credit-default swap spread - a key measure of credit risk - stood at 56 basis points, after closing Monday at 55.25 basis points.

CDS are tradable, over-the-counter derivatives that function like a default
insurance contract for debt. If a borrower defaults, the protection buyer is paid
compensation by the protection seller. Swap buyers may be protecting investments they own or simply making bearish bets against companies or countries.

"Concern over the U.K.'s fiscal policy is not new and has been flagged as a
risk by other rating agencies," said Stuart Bennett, a currencies analyst at
French bank Calyon in London.

A strong rating is essential for attracting investor interest to a country's
bonds. Without it, many market players are unable to invest. If the U.K. were to lose it's AAA rating, some investors would be forced to sell their existing
holdings. That would push up the U.K.'s cost of borrowing.

Concerns that the U.K. may eventually face this possibility have been rising since the Standard & Poors rating agency lowered its outlook for the U.K. in May.

With the recession taking a big bite out of tax receipts, Britain is expected
to run a budget deficit of some £175 billion this year and next, amounting to some 12% of gross domestic product.

The opposition Conservative Party, which is leading in the polls ahead of
next year's general election, has promised significant public spending cuts to
reduce the U.K.'s deficits and maintain confidence in the U.K.'s debt management.

Really2

inspector_monkfish wrote: »

yeah, and Essex is top

Ase, looks like my "r" is not woking.:D

Really2

Thrugelmir wrote: »

Shows how important it is to the UK's financial sector.

That is a surprise, where are places like Japan and China then?

StevieJ

Really2 wrote: »

That is a surprise, where are places like Japan and China then?

It mentions Japan.

Fitch also said it would have to review its AA- rating on Japan government bonds

inspector_monkfish

Really2 wrote: »

That is a surprise, where are places like Japan and China then?

in the Far East somewhere.
Take a look here....;)


http://www.mapsofindia.com/worldmap/world-map.gif

Jonbvn

Generali wrote: »

The fallout of the UK losing her AAA would be pretty severe. Any AAA rated company would want to move their headquarters from the UK as otherwise their financing costs would rise (it's impossible for a company to have a higher credit rating than the Government of the country in which they're based).

So who would we be looking at moving? HSBC, BP, Shell?

lostinrates

Why only compare to so few countries?

Thrugelmir

Really2 wrote: »

That is a surprise, where are places like Japan and China then?

Biggest Banks in the world by asset size (£ billion) at March 2009.


1. RBS £3,808 UK
2. Deutche Bank £2,974 Germany
3. BNP Paribas £2,494 France
4. Barclays £2,459 UK
5. HSBC £2,354 UK
6. Credit Agricole £2,268 France
7. Citicorp £2,188 USA
8. UBS £2,019 Switzerland
9. Mitsubshi £1,818 Japan
10. Bank of America £1,716 USA

HBOS was 18th and Lloyds 35th, combined asset value £2,044. So would be 8th on the list as a single entity.

Generali

Really2 wrote: »

That is a surprise, where are places like Japan and China then?

Moody's has Japan at Aa2, Fitch at AA-

I think Fitch has China at AA- on negative watch.

inspector_monkfish

Thrugelmir wrote: »

Biggest Banks in the world by asset size (£ billion) at March 2009.


1. RBS £3,808 UK
2. Deutche Bank £2,974 Germany
3. BNP Paribas £2,494 France
4. Barclays £2,459 UK
5. HSBC £2,354 UK
6. Credit Agricole £2,268 France
7. Citicorp £2,188 USA
8. UBS £2,019 Switzerland
9. Mitsubshi £1,818 Japan
10. Bank of America £1,716 USA

HBOS was 18th and Lloyds 35th, combined asset value £2,044. So would be 8th on the list as a single entity.

aww cr ap, we're not on there :cool:

where did you get that info from mr t?