Moody's cuts Ireland credit rating to junk status

Moody's has tonight cut Ireland's credit rating to junk.

The ratings agency said it was downgrading the country's bond ratings by one notch to Ba1 from Baa3 with a negative outlook.

Ireland joins Portugal and Greece in becoming the third euro zone country to have its ratings cut to junk. Portugal's rating was cut four levels to Ba2 just over a week ago.

"The key driver for today's rating action is the growing possibility that following the end of the current European Union-International Monetary Fund support programme at year-end 2013 Ireland is likely to need further rounds of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a precondition for such additional support," Moody's said in a statement.

The ratings agency previously cut Ireland's credit rating two levels on April 15th to the lowest investment grade.

"Although Moody’s acknowledges that Ireland has shown a strong commitment to fiscal consolidation and has, to date, delivered on its programme objectives, the rating agency nevertheless notes that implementation risks remain significant, particularly in light of the continued weakness in the Irish economy," it said.

"The negative outlook on the ratings of the Government of Ireland reflects these significant implementation risks to the country’s deficit reduction plan as well as the shift in tone among EU governments towards the conditions under which support to distressed euro area sovereigns will be made available," it added.

Moody’s has today also downgraded Ireland’s short-term issuer rating by one notch to Non-Prime (commensurate with a Ba1 debt rating) from Prime-3.

In addition, the ratings agency downgraded by one notch to Ba1 from Baa3 the long-term rating and to Non-Prime from Prime-3 the short-term rating of Ireland’s National Asset Management Agency (Nama).

In a statement issued this evening, the National Treasury Management Agency (NTMA) stressed it had sufficient funding under the EU-IMF bailout to cover all its financing requirements until the end of 2013.

It said that the situation in the euro zone was evolving rapidly and that decisions reached at yesterday's meeting of European financial ministers, which include an enhancing of the European Financial Stability Facility, were "positive developments" for Ireland.

It added that the country retains investment-grade status with the other main ratings agencies.

Additional reporting: Bloomberg