Saturday 21 October 2017

Moody's to upgrade Irish bonds for second time in 2014

Moody's is expected to raise Ireland's bond rating for the second time in six months today
Moody's is expected to raise Ireland's bond rating for the second time in six months today

Donal Griffin and Colm Kelpie

IRELAND's bond rating will probably be raised today for the second time in less than six months by Moody's, as the economy stabilises and concerns that the eurozone may be under threat eases, analysts have predicted.

Moody's is widely expected to bolster its ranking of Irish bonds to Baa2 from Baa3 as the ratings company delivers its latest verdict on the country, according to six of nine analysts and economists surveyed by Bloomberg. Three analysts predict no change.

The predicted hike comes as borrowing costs hovered around 2.6pc yesterday.

"We'll go for an upgrade in rating this week given the generally bullish view Moody's seem to have right now on the euro zone," said Owen Callan, an analyst with Danske Bank in Dublin.

To an extent, investors, who often ignore rating changes, have already upgraded their view of Ireland, reflecting European Central Bank president Mario Draghi's 2012 pledge to do "whatever it takes" to defend the euro.

In January, Moody's upgraded Ireland's government debt from "junk" to higher quality "investment grade" status and also gave the country a positive outlook. That hike was first reported in the Irish Independent a month earlier. The decision is a big boost to the Government and the NTMA, which had lobbied hard for the change.

This meant that the country was regarded as a lower-risk investment by all of the main credit agencies for the first time since 2011.

Last week, the country's borrowing costs fell below the UK's for the first time in more than five years even as the Irish Government grapples with sluggish consumer spending and delinquent mortgages. Moody's sovereign rating on the UK is Aa1.

The yield on Ireland's 10-year benchmark government bond has fallen 87 basis points over the last 12 months.

Difference

The spread, or difference, between German bonds of a similar maturity has also fallen 87 basis points to 1.26pc.

The National Treasury Management Agency (NTMA) successfully sold €500m of three month treasury bills yesterday morning. The total bids received amounted to €1.77bn – 3.5 times the amount on offer.

The Treasury Bills, which have a maturity of three months, were sold at an annualised yield of 0.22pc.

The latest Moody's assessment comes as Irish employment grows, the government deficit narrows and the wider crisis which threatened the euro-region's future subsides.

(Additional reporting Bloomberg).

Irish Independent

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