♠ Posted by Emmanuel in Southeast Asia
at 8/04/2013 09:43:00 AM
So, just how "moody" is Moodys? For reasons I'll explain, it makes me want to take large amounts of hallucinogens to acquire their "expertise." The global financial crisis revealed that, if anything, major credit rating agencies are not trustworthy. Conflicts of interest and plain negligence abounded. When push comes to shove, it's ultimately up to us to perform due diligence on prospective investments and not have some self-proclaimed rating agency do the job (poorly) for us. This introduction brings me to the Philippines seeking to complete all major credit rating agencies giving it an "investment grade" designation. On March 27 of this year, Fitch granted the country such a rating after waiting for it for quite some time. On May 2, Standard and Poors followed suit in doing so. All this leaves just Moodys to grant the Philippines such a designation.
During the past week, Moodys people were in Manila assessing what rating to give the Philippines. These discussions were somewhat ridiculous given how low yields are on Philippine sovereign debt. If we take international capital markets as our gauge of investor perceptions of trustworthiness, the Philippines' performance is laudable: In case you're wondering, 10-year Philippine bonds are yielding lower than solidly investment grade nations that have been considered as such for a long time including Israel, Australia, Poland, New Zealand, Chile and Mexico. (And no, the government isn't faking low yields by buying its own papers alike certain governments.) The real question to me isn't whether the Philippines is investment grade but rather why its credit rating isn't higher.
And here's the kicker: The Moodys folks are questioning the government's "failure" to spend all of its budget within the fiscal year. Last I checked, it was called "coming in under budget." Correct me if I'm wrong, but in this era of trillion-dollar American deficits, isn't this a rather desirable outcome?
The government’s failure to spend its budget within schedule will be one of the main issues to be discussed in meetings between state economic managers and representatives from Moody’s Investor Service this week. Moody’s representatives are in Manila as part of the debt watcher’s process in reviewing the Philippines’ sovereign credit rating.You apparently don't need an understanding of finance to work for Moodys. Heck, if I took lots of drugs, I'd prolly work for Moodys, too. For them, true-to-life market evaluations don't matter--and underspending is "bad."
Moody’s still considers long-term peso and dollar bonds issued by the Philippine government as “junk” investments. The firm’s peers, Standard & Poor’s and Fitch Ratings, already rate the Philippines at investment grade. “Funding is not the issue. The issue is capacity to spend the money,” Moody’s senior analyst Christian de Guzman said Monday.
