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Last updated: November 10, 2011 8:55 pm
France demanded an inquiry after a leading rating agency mistakenly suggested on its website that it had downgraded the country’s prized triple A credit rating, sparking a sell-off in Paris’ government bonds.
French markets regulator AMF said it had opened an investigation into the error by Standard & Poor’s. This followed a demand by François Baroin, finance minister, for an inquiry by the European financial markets authority and AMF.
French 10-year bond yields leapt to 3.46 per cent – a 27 basis point rise on the day – while the country’s extra cost to borrow over Germany rose to a euro-era record of 168bp, a 21bp jump on the day.
Standard & Poor’s was forced to put out a statement: “As a result of a technical error, a message was automatically disseminated today to some subscribers of S&P’s Global Credit Portal suggesting that France’s credit rating had been changed.
“This is not the case: the ratings of Republic of France remain triple A with a stable outlook and this incident is not related to any ratings surveillance activity. We are investigating the cause of the error.”
S&P’s Global Credit Portal, the company’s subscriber service, used by banks and investors in financial centres, published the mistake at about 3pm. Its analysis of France had been linked in a section on its website entitled “downgrade”.
The mistake was greeted with anger in Paris where the government is fighting to defend its triple A status – including unveiling a €65bn five-year supplementary budget saving plan this week aimed at convincing markets and the rating agencies that it is determined to stick to its fiscal consolidation targets.
“Can you believe this,” said one official. “This is not going to please people. They say it is a mistake. It is very strange to say the least. In the situation we are in at the moment you can’t play around like this.”
One trader in London said: “Many people just wanted to off-load their French bonds. We are furious with S&P. To make such a mistake in this febrile market with worries over France’s triple A is highly irresponsible and alarming.”
Mr Baroin said the inquiry should look into the “causes and the consequences of this error”.
France has been a strong supporter of measures to curb the influence of the rating agencies, backing proposals by the European Commission to set up a rival to counterbalance the three main agencies. It also supports putting in place a ban on downgrades on countries at times of speculative attacks.
S&P stressed that if subscribers clicked on to the link it showed that the rating had not been downgraded. But yields rose by about 20bp after the statement, with traders saying the leap was almost entirely due to downgrade fears.
David Owen, chief European financial economist at Jefferies, said: “France has been at the centre of rumours over its triple A. So this was a very bad time to put this out.”
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