Will Irish eyes smile after Moody’s review?

Government hoping for a rating upgrade

Brendan Howlin, Minister for Public Expenditure and Reform sharing a joke with Michael Noonan, Minister for Finance after Ireland officially exited the EU/IMF bailout programme late last year. Photograph: cyril byrne

Brendan Howlin, Minister for Public Expenditure and Reform sharing a joke with Michael Noonan, Minister for Finance after Ireland officially exited the EU/IMF bailout programme late last year. Photograph: cyril byrne

 

Irish eyes will be on Moody’s Investors Services this Friday, but will they be smiling, as the ratings agency updates its view on the country?

The Government will be hoping for a ratings upgrade, with Moody’s being the only major agency that still classes Irish Government debt as risky.

National Treasury Management Agency chief executive John Corrigan last week joked that his people were using their best chat-up lines to persuade Moody’s to lift Ireland’s credit rating out of junk. However, market commentators are split on whether the charm offensive will succeed when the ratings company delivers its latest verdict.

Moody’s, which gave Ireland its top Aaa grade in 1998 before the euro was introduced, cut the country’s rating to non-investment grade, or junk, in July 2011 following the financial collapse.

Minister for Finance Michael Noonan has said he hopes Moody’s will raise the country’s credit ranking this year.

Between the EU-IMF bailout programme exit and the NTMA’s success in securing €3.75 billion from a syndicated 10-year treasury bond issuance at a competitive yield of 3.543 per cent, the chances of an upgrade might just be improved. Moody’s analyst Kristin Lindow said the Irish sale of 10-year bonds “confirmed broad investor appetite for the Government’s debt at quite low yields, which is credit positive as the authorities undertake the next steps to regain debt sustainability amid a strengthening domestic recovery”.

However, she added that the bond sale has no direct relationship to the Moody’s rating per se.

Second bailout
Only last March, Moody’s expressed its view that Ireland would need a second bailout.

It expected Ireland would face challenges regaining market access in 2013 and would need to rely on the European Stability Mechanism, at least partially, when the bailout programme ended.

This Friday will also see the publication of a review of our fellow PIGS partner in crisis – Portugal. Standard & Poor’s will release its assessment on Portugal and while many market participants say an upgrade of the country’s “junk” status is unlikely, the ratings agency is expected to raise its outlook.