Following Fitch’s downgrade of a slew of Spanish banks, Moody’s – just barely late to the party – cut Spain’s debt rating by three notches, sending it to just above junk status.
Spanish bond yields broke the 7% mark – an unsustainable level, according to many.
And now analysts, looking at the ever-accumulating problems with Spain’s economy, are beginning to fear that the limited aid to its banks won’t be enough and that an official sovereign bailout is inevitable.
The downgrade itself portends the worst, says Peter Dixon, Global Financial economist at Commerzbank:
“It falls hard on the heels of last week’s downgrade by Fitch. So in that sense it’s not such a big deal. But, you know, I think it does indicate that the ratings agencies are pushing Spain ever close toward the edge of that cliff.”