PIGS going down

Greece has been downgraded by Fitch and put on negative outlook by S&P. Now Spain is in the same spot with Spain on negative outlook.

What is becoming clear is that the AAA rating for a country will become rarer. Note that all of the Aaa rated sovereigns in the Moody's universe are showing increases in debt to GDP and rising interest payments relative to government payments. The one exception is Switzerland. One of the fast declines is expected to be the US. However, before we get to the AAA probme we have other worries.

The current decline in the Euro may be related to the increase in sovereign risk in the EU. While the problem is large and growing for the US, there is at least some flexibility on what can be done with monetary policy. That is not the case of the EU where the ECB controls monetary policy. Money expansion or a bail-out for other EU members is not available for bond investors. his places some unique risk with the PIGS, Portugal, Spain, Italy and Greece.