Bloomberg News

S&P Writes Wrong Headline Upgrading Brazil After France Gaffe

November 18, 2011

Nov. 17 (Bloomberg) -- Standard & Poor’s, a week after roiling global markets with an erroneous message to subscribers suggesting it cut France’s credit rating, sent a release today announcing that it had raised Brazil’s credit ranking to BBB-. That’s the grade the country already had.

S&P, the world’s largest provider of bond ratings, sent the release at 2 p.m. with the headline “S&P Ups Brazil Sov Rtg To ‘BBB-’; Strong Amid Global Worsening.” The body of the release correctly stated that Brazil and its $2.1 trillion economy had been upgraded to BBB. New York-based S&P sent a corrected headline 16 minutes later.

The real rose to 1.7794 per dollar at 2 p.m. New York time, from an intra-day low of 1.7885. It then fell to 1.7818 two minutes later.

“There is a lot of volatility and confusion,” Mauricio Junqueira, a money manager who helps oversee $300 million at Squanto Investimentos in Sao Paulo, said in a telephone interview. “I have some people calling and asking what’s going on. Everyone is lost. S&P has to be careful.”

John Piecuch, a spokesman for S&P in New York, said the firm is looking into the matter.

The mistake comes as regulators in Europe and the U.S. consider regulations designed to rein in S&P and Moody’s Investors Service, which together issue 79 percent of credit ratings, according to a report released in September by the U.S. Securities and Exchange Commission. European Union Financial Services Commission Michel Barnier said on Nov. 15 policy makers were considering plans to ban some sovereign ratings.

‘Stricter Rules’

“Credit-rating agencies should follow stricter rules, be more transparent about their ratings and be held accountable for their mistakes,” Barnier said in a statement from the European Commission in Brussels.

France’s stock market regulator opened an investigation after S&P sent, and then corrected, an erroneous message to subscribers suggesting France’s top credit rating had been downgraded. French 10-year bond yields rose as much as 28 basis points after the mistaken announcement. S&P said the message was a “technical error” and that it was cooperating with “all the relevant authorities.”

The European Union proposed on Nov. 15 new regulations that would force companies to rotate the credit-rating companies they hire, as well as restrict when the raters can release their assessments of governments.

--With assistance from John Detrixhe in New York. Editors: Pierre Paulden, Robert Burgess

To contact the reporters on this story: Zeke Faux in New York at zfaux@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net;

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net; David Papadopoulos at papadopoulos@bloomberg.net


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