Standard & Poor’s Ratings Services and Moody’s Investors Service will defend their work amid an investigation by Italian prosecutors into the rating companies’ statements.
The probe in the southern city of Trani is “without foundation” and the credit rating company will “strenuously defend its work,” S&P said in an e-mail. “Moody’s takes its responsibilities surrounding the dissemination of market sensitive information very seriously and is cooperating with the authorities,” the company said in a separate e-mail.
Moody’s on May 6 said in a report it was assessing the risk of “sovereign contagion” that could affect the banking industries of Portugal, Spain, Italy, Ireland and the U.K. Italy isn’t among the countries most at risk from Europe’s spreading debt crisis and its credit outlook for 2010 remains stable, Moody’s said the following day.
No one responded to phone calls placed to the prosecutor’s office in Trani.
The inquiry comes as the yield premium investors demand to hold 10-year Italian bonds over German bunds trades near a euro- era record 392 basis points hit yesterday, amid concern the sovereign debt crisis is spreading. Spreads are more than 200 basis points higher than at the start of the year.
Italian Prime Minister Silvio Berlusconi is struggling to convince investors that Italy won’t become the next victim of Europe’s debt crisis. Berlusconi said he doesn’t think the current market turmoil will get worse. Because much of Italy’s public debt is long term, it won’t be affected by rising yields, Berlusconi also said during a briefing in Rome today after meeting with Italian executives and unions.
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