Outlook on Irish sovereign debt upgraded to 'stable'

23rd September 2013

The outlook on the Irish Government’s debt has been upgraded from negative to stable by credit ratings agency, Moody’s.
 
Moody’s, which continues to apply a junk rating to Irish government bonds, has revised its outlook in the first sign that the agency may consider a ratings upgrade.
 
In a note issued late last week, Moody’s revealed the key drivers of the outlook change were the Government’s progress in restoring solvency to its public finances, and an improvement in its liquidity leading to a reduced risk of losing access to financial markets.
 
The note also says the nation’s debt and deficit position has improved as a result of a promissory note deal and the extension of the terms of bailout loans from the European Union (EU).
 
Ireland also appears to be better insulated from shocks to investor confidence from elsewhere in the euro area, with the problems in peripheral countries such as Cyprus cited.
 
Michael Noonan, Minister for Finance, believes the improving outlook was a "welcome development".
 
"While it’s disappointing that the move was not an upgrade in the rating, it is clearly a step in the right direction," he said.
 
Throughout the eurozone crisis, Moody’s has consistently been the most negative and pessimistic of the ratings agencies. Its last ratings note on Ireland, issued back in March, when it affirmed its junk rating for the country’s debt and its negative outlook, cited vulnerability of the euro area to shocks and poor asset quality of the Irish banks.
 
Subsequently, its latest note suggests Irish financial stability is improving, providing the Government meets its fiscal consolidation targets, with growth supported by an improving economy in the UK and eurozone.
 
Of the other major ratings agencies, Standard and Poor’s rates Ireland at a low investment grade level of BBB+ with a positive outlook.
 
Fitch also rates Irish sovereign debt at BBB+ with a stable outlook, with suggestions it may consider an upgrade at its next review.
 
An investment-grade rating from all three of the main ratings agencies would make Irish debt more attractive to investors, with greater interest by investors in government bonds, which could help to reduce the Government’s cost of borrowing from the markets.


Image: joshgately (flickr)

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