Moody's says ECB bond plan will help State
CREDIT RATING agency Moody’s says the European Central Bank’s latest bond-buying plan will help Ireland’s full return to the bond markets but the country’s creditworthiness will continue to be affected by the wider euro crisis.
The only credit rating agency to rank Irish government debt at “junk” status said that the ECB’s programme contained “credit positive elements” for “non-core” countries as they regain market access.
“In this context, it gives Ireland a wider range of options than before, and could potentially serve as a building block in Ireland’s efforts to reaccess the market in a sustained fashion,” said Moody’s senior analyst Dietmar Hornung.
But the potential benefits for Ireland’s rating were offset by deeper problems in the euro area, he said.
“Apart from sustained access to private markets which would represent a positive rating factor, the assessment on how far the more pervasive problems in the euro area remain, and how far they continue to pose a threat to Ireland, continues to be an important consideration in the assessment of Ireland’s creditworthiness,” said Mr Hornung in an emailed response to a query from The Irish Times.
The comments echo the view of National Treasury Management Agency chief executive John Corrigan, who said on Wednesday that the potential for an upgrade in Ireland’s rating was constrained by concerns about the euro zone.
Moody’s said last month that applying for a follow-up bailout programme as a precaution when the current bailout expires next year may offer Ireland a “backstop” to reaccessing the markets.
The Government borrowed a further €500 million yesterday selling treasury bills, loans maturing in three months, for the second time this year at more than half the cost of an auction in July.
The yield, or interest rate, paid on the treasury bills was 0.7 per cent compared with 1.8 per cent on the bills sold two months ago.
Owen Callan, bond dealer at Danske Markets, which is a primary dealer in Irish government bonds, said the latest sale of bills was “another modest but meaningful step in Ireland’s phased return to full market financing”.
The yield on Irish five-year bonds fell to 4.1 per cent, the lowest level since August 2010.