S&P downgraded Spain’s credit rating two notches yesterday, bringing it to just one notch above a junk rating.
Another major rater, Moody’s, already has Spain rated at one notch above junk and is currently considering another downgrade.
Societe Generale strategist Ciarán O’Hagan wrote this morning that “Even the prospect of seeing the two major agencies rating Spain below investment grade will lead to widespread selling [of Spanish government debt] over the coming month.”
As a result, the Spanish banking system, heavily laden with Spanish government debt, will likely find itself in an even worse position than before.
We explain the implications below:
Produced by Daniel Goodman
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