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The euro is falling again..nearing the $1.40 level again...after Fitch Rating downgraded Greece’s credit rating...by three levels...to B+ from BB+...an astounding 4x levels below investment grade.
It now equals the debt ratings for...Venezuela, Georgia and Sri Lanka.
Fitch also warned that even a voluntary extension of its bond maturities...so-called "reprofiling" by the ECB...would be considered a default.
Greece’s two-year bonds now yield...more than 25%.
Also pushing down the euro were fears of change in the upcoming Spanish elections where the Socialist government may lose to the Popular Party.
Analysts believe elections might uncover unknown financial problems there...unrecorded "hidden debts"...from governmental slow pay policies...up to...$26 Bn euros!
New comments from Jens Weidmann, a member of the ECB Governing Council, also spooked the market.
He said it would be “impossible” for the central bank to take extended-maturity Greek bonds in its refinancing operations.
The WSJ today reported that Greek banks borrowed...$125 Bn usd...from the ECB in March...in 3 month loans...using only Greek bonds as collateral.
“It’s Greece, it’s the Spanish elections,” said an HSBC analyst. “The notion that banks wouldn’t be able to use Greek paper as collateral should there be an extension of the terms of sovereign debt is another example of ECB reticence to allow Greece, the rest of Europe or market participants to think there will be some type of restructuring.”
