Macau monetary authority breaks its own rules
Rules are made to be broken. It's a cliche that's generally tested by the more edgy types, dodgy financiers and the like. But you wouldn't expect it to be practised by a central bank. But the Macau Monetary Authority (MMA) has done just that. Earlier this year the MMA bought an undisclosed amount of Portuguese sovereign debt at auction. Portuguese debt was downgraded last year after the country's travails, to A by Standard & Poor's and to A1 by Moody's.
But MMA rules say investments must have an AA investment grade - four notches above the current level of Portuguese debt.
Asked about this apparent breach of its own rules, the MMA answered website Macauhub slightly mysteriously, saying that buying Portuguese sovereign debt had been the result of 'prior research' and was based on 'the value of investment, inherent risks and the current and future situation of the Portuguese economy, and it can be concluded that the ratings given to Portugal of 'A-' by Standard and Poor's and 'A1' by Moody's are included in the group of investment grade ratings'.
Recently Portuguese debt has risen on the back of downgrades to Greek debt, with its 10-year bond yielding 7.55 per cent - well above what the government considers the 'danger zone' levels of 7 per cent. Since it is unlikely that Portugal will be allowed to go bust this may turn out to be rather a good investment.
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