Moody's again cuts Irish ratings

 

Moody's has cut Ireland's sovereign rating by two notches and kept its outlook on negative, a day after fellow ratings agency Fitch upgraded its outlook for the country.

The agency cut the rating on Ireland's foreign and local currency Government bonds to Baa3 from Baa1.

The key drivers behind this move included an expected decline in the Government’s financial strength, coupled with the uncertainty created by the solvency test required by the European Stabilisation Mechanism (ESM) for the provision of future liquidity support.

The outlook on these ratings remains negative, as Moody’s believes the Government’s financial strength could decline further if economic growth were to be weaker than expected.

“Following today's downgrade, the rating on Ireland remains in the investment-grade category, reflecting the Irish economy's continued competitiveness and business-friendly tax environment,” Moody’s said.

It noted that Ireland’s commitment to fiscal consolidation and structural reform remains strong.

Moody's Investors Service analyst Dietmar Hornung said Irish debt restructuring is not a "plausible scenario". In a phone interview today he said that while the negative outlook on the country's rating reflects the "unbalanced risks" facing the nation, Ireland has a "good track record of delivering" fiscal consolidation.

The agency has also cut its ratings for the National Asset Management Agency (Nama). It downgraded Nama’s short-term rating to Prime-3 from Prime-2, and its long-term rating by two notches to Baa3. The outlook on these ratings is also negative.

Ireland's bonds led a third day of declines by the securities of Europe's most indebted nations after Moody’s rate cut announcement.

Irish yields rose 11 basis points to 9.45 per cent this morning in London, the highest since April 7th. Portugal's 10-year bond yield reached a euro-era high of 8.94 per cent. The two-year yield also climbed to a record 9.48 per cent. The yield on Greece's two-year securities rose eight basis points.

Additional reporting Bloomberg