The mass downgrades of major global banks by ratings agency Moody’s Investors Service Thursday night don’t appear to have caused the downwards market movements one might have expected.
While the stocks of the banks affected, including Citigroup, Morgan Stanley, HSBC, and Goldman Sachs, fell slightly across the board yesterday, they didn’t suffer the huge plunges some feared, suggesting that much of the risk of a downgrade was already factored into the price. Some stocks actually rose in after-hours trading.
U.S. banks’ credit spreads were tighter following the downgrade with Morgan Stanley’s bond spreads around 25 basis points tighter — usually a positive sign for the stock’s future.
One of the reasons the Moody’s downgrades didn’t affect markets too badly is that it’s not really a shock. The ratings agency flagged in February that it was considering a mass downgrade of the banks. News of the downgrades started leaking out Thursday afternoon, before European and U.S. markets closed.
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