Fannie and Freddie Downgraded, France Will Be Downgraded, Munis Getting Hammered … States Will Be Next

As I noted yesterday, munis will get hammered by the credit downgrade, and France may soon lose its AAA credit.

S&P Debt Downgrade: Munis Pounded

Less than 12 hours later, munis are getting pounded by downgrades.

France In Trouble

French credit default swaps are soaring.

Here’s a summary courtesy of Business Insider:

For background on the importance of credit default swaps as an economic indicator, see this.

Fannie, Freddie and Clearinghouses Hit

S&P just downgraded Fannie and Freddie.

In addition, S&P downgraded major clearinghouses including Options Clearing, National Securities Clearing and DTCC.

All 3 companies are major clearinghouses for over-the-counter derivatives, as well as other types of financial instruments.

Next Up … States?

As I reported last month, the real danger is entire states getting downgraded.

Moody’s has warned against 5 states in particular:

  • Maryland
  • New Mexico
  • South Carolina
  • Tennessee
  • Virginia

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