S&P Flubs French Rating, May Lead to Tighter Agency Regulation
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S&P yesterday mistakenly sent out an alert notifying that they have downgraded France’s top credit rating. Reuters reports that the downgrade resulted in “the worst day for France's government bonds since before the euro was launched in 1999.”
Roughly two hours later, the S&P reissued a letter stating that the message was a mistake and reflects a technical error. The S&P assured that this action was not a direct attempt to attack France.
The French Finance Minister, Francois Baroin, responded quickly to the error calling it “quite shocking." Soon after the error, French financial markets regulator Autorité des marchés financiers (AMF) opened a probe into the case.
Nonetheless, France still holds a top AAA rating and people who clicked on the S&P link would have noticed that portion was unchanged; only the title of the alert stated S&P was downgrading France’s credit rating.
Following the mix-up, S&P sent out a second letter which clarified France's current credit rating, though it was sent out after European markets were already closed and the damage was already done. Yields on France's 10-year paper surged about a quarter of a percent after the original downgrade alert was released. After the second letter, the correction letter, investors showed a sign of relief as the euro rose slightly on the dollar.
An error such as this by S&P may increase the regulations and rules in which rating agencies must follow. Reuters highlights, "Michel Barnier, the European Union's top financial regulatory official, noted that the European Securities and Markets Authority will present next week new regulation on the credit ratings agencies."
Today U.S. markets are notably higher, the Dow up about 1.5 percent, Nasdaq up 1 percent, and S&P 500 up 1.3 percent.
Roughly two hours later, the S&P reissued a letter stating that the message was a mistake and reflects a technical error. The S&P assured that this action was not a direct attempt to attack France.
The French Finance Minister, Francois Baroin, responded quickly to the error calling it “quite shocking." Soon after the error, French financial markets regulator Autorité des marchés financiers (AMF) opened a probe into the case.
Nonetheless, France still holds a top AAA rating and people who clicked on the S&P link would have noticed that portion was unchanged; only the title of the alert stated S&P was downgrading France’s credit rating.
Following the mix-up, S&P sent out a second letter which clarified France's current credit rating, though it was sent out after European markets were already closed and the damage was already done. Yields on France's 10-year paper surged about a quarter of a percent after the original downgrade alert was released. After the second letter, the correction letter, investors showed a sign of relief as the euro rose slightly on the dollar.
An error such as this by S&P may increase the regulations and rules in which rating agencies must follow. Reuters highlights, "Michel Barnier, the European Union's top financial regulatory official, noted that the European Securities and Markets Authority will present next week new regulation on the credit ratings agencies."
Today U.S. markets are notably higher, the Dow up about 1.5 percent, Nasdaq up 1 percent, and S&P 500 up 1.3 percent.
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