The new big fear is that this month, either or both, Moody’s and S&P, will downgrade Italian debt two notches into junk territory. The potential implications of such a move, not only for Italy but for the European project as a whole, are so huge that many market players are discounting it as a possibility altogether.
“A downgrade to junk could trigger a full-blown (euro zone) crisis,” said Nicola Mai, a portfolio manager at PIMCO, the world’s largest bond investor. “…Which is why I don’t believe the agencies will do it, I don’t think they will want to be the ones causing a crisis in Europe.”
Iain Stealey, a fixed income portfolio manager at JP Morgan Asset Management, concurs. “It would be a very, very big decision, just given the size of the Italian bond market; it makes up something like a fifth of government bonds in the euro zone,” he said. In other words, contagion would spread across the Euro Zone like wildfire....
Raging Bull-Shit
Italy’s Debt Crisis Thickens Don Quijones