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Bank Downgrades Evoke Rallies

Stocks and bonds move higher after Moodys cuts its ratings on 15 global banks.

By Dakin Campbell and Michael J. Moore, Bloomberg | Updated on June 22, 2012

Downgrades of Morgan Stanley, Credit Suisse Group AG and 13 other global banks, announced by Moody’s Investors Service after months of speculation about dire fallout, were met instead by rallies in stocks and bonds.

The cost to protect Morgan Stanley’s debt against losses dropped, and the shares rallied as much as 4.6 percent in extended trading yesterday after the ratings firm cut the bank by two levels rather than a threatened three grades. Credit-default swaps tied to Bank of America Corp., which was lowered to within two levels of junk along with Citigroup Inc., also improved, along with those of Goldman Sachs Group Inc.

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