EconoMeter: Do S&P Downgrades in Europe Matter?

San Diego Union Tribune--While it did not matter for the U.S., it may matter for European countries based on triggering the inability of many banks to buy the domestic country bonds. What happens is that on AAA rated bonds the banks need keep no equity reserves, but when the bonds are downgraded they must keep reserves, thus negating much of the demand for the bonds and driving up rates. (Full Story)

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