Credit Ratings Now Irrelevant to Bond Markets?
NEW YORK (
Bullion Bulls Canada) -- In our fraud-ridden markets, trivialities like economic fundamentals are no longer a factor in pricing markets. Rather, instead of "fundamentals" we now have patterns of manipulation: the direction in which markets are being
In this respect, we look to the corporate media propaganda machine not for information, but rather for clues on if/when a new pattern of manipulation is about to occur in a particular market. Here we have
Previously, credit ratings
mattered. Indeed, the knee-jerk reaction of lower credit ratings leading to higher interest rates on European bonds was the
But that was then, and this is now. With the rape of Europe now a fait accompli, the bankers have customized a new crime paradigm for the bond market -- one which takes into account that the absurd, fraudulent credit ratings of the U.S. and UK are about to decline to at least slightly more plausible levels.Does this mean that U.S./UK bond-holders should be dumping the most over-priced bonds in the history of the world? Of course not, scoffs Bloomberg; because as any good propagandist could tell you (starting today), credit ratings don't matter in the bond market.
...Bond investors needn't worry that a rating cut will hurt returns. About half the time, government bond yields move in the opposite direction suggested by new ratings, according to data compiled by Bloomberg on 314 upgrades, downgrades and outlook changes going back to 1974.Let me explain exactly what Bloomberg is saying here, so that readers will understand the true significance of what is being asserted. If bond interest rates move in an (expected) counter-direction to ratings upgrades/downgrades, this is known as a "negative correlation." If bond interest rates moved with ratings upgrades/downgrades, this is known as a "positive correlation." However, when interest rates are equally probable to move in either direction after a ratings change (as Bloomberg asserts) this means that interest rates have zero correlation to ratings changes -- i.e. changes in ratings are totally irrelevant to bond prices/interest rates. Thus, the claim Bloomberg is attempting to make is that for nearly 40 years, the credit ratings of the major credit rating agencies have been 100% irrelevant to bond market prices.
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