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 drivers behind this move included an expected decline in the State’s fiscal strength, coupled with uncertainty created by the solvency test required by the European Stabilisation Mechanism (ESM) for the provision of future liquidity support.
The ratings outlook remains negative, as Moody’s believes the Government’s fiscal strength could decline further if 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.
Moody’s Investors Service analyst Dietmar Hornung said Irish debt restructuring is not a “plausible scenario” but that Ireland has a “good track record of delivering” fiscal consolidation.
The agency has also cut its rating 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.
The State’s bonds led a third day of decline by the securities of Europe’s most indebted nations after Moody’s rate cut announcement. Irish yields rose 33 basis points to 9.3 per cent yesterday in London, the highest since April 7th. Portugal’s 10-year bond yield reached a euro-era high of 8.94 per cent early in the day but fell back later. – (Additional reporting: Bloomberg)
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