UPDATE 1-Market can prompt vicious credit circle-S&P official

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FRANKFURT, May 7 (BestGrowthStock) – Market moves against individual
countries’ sovereign debt can create a vicious circle as falling
credit quality and higher refinancing costs feed into each
other, a top Standard & Poor’s official said on Friday.

S&P European chief credit officer Blaise Ganguin said
although ratings were not driven by market moves, sometimes
these were relevant in assessing credit quality as higher bond
yields affected a country’s ability to service debt.

S&P downgraded Greece to BB+ late last month, and has also
downgraded Spain and Portugal, helping to push up yields on the
countries’ debt. [ID:nLDE6460SX]

“We make decisions based on fundamental credit quality,” he
told journalists.

“Market prices are going to feed into the fundamental credit
quality to the extent that the refinancing costs increase, and
at some point that becomes a vicious circle.”

Ganguin said market scepticism was the main driver for the
increase in Greek debt spreads that occurred even before S&P cut
its rating on the country to ‘junk’ level.

“The market … basically decided, (in the absence of)
ratings signals, that they doubted the restructuring plan
proposed by the Greek government,” he said.

“A market can send a wrong signal, but when a creditor must
go back to the market and pay those (higher) prices (to
refinance debt) that has an impact on the credit quality.”

Stock Investing

(Editing by Jason Webb, John Stonestreet)

UPDATE 1-Market can prompt vicious credit circle-S&P official