Tuesday 20 March 2018

Moody's upgrade needed to rouse Asian investors

Minister for Communications Energy and Natural Resources Pat Rabbitte
Minister for Communications Energy and Natural Resources Pat Rabbitte

Colm Kelpie and Michael Brennan

AN upgrade by ratings giant Moody's would boost interest among Asian investors in Irish bonds and push down our borrowing costs, the head of the state's debt management agency has said.

John Corrigan, chief executive of the National Treasury Management Agency (NTMA), said there was potential for a "huge push in Irish bond yields" if the ratings giant moved on Ireland.

Moody's was the last of the three main credit rating firms to class Irish government debt as "junk".

But he said there had been a softening of Moody's "euro scepticism", signalling the agency may yet review its take on Ireland.

"If we were to move to a Moody's investment grade I would anticipate a shift down in yields, which would involve us getting a better price for our debt," Mr Corrigan told RTE Radio's 'This Week' programme.

Moody's raised the outlook on Ireland's sovereign rating to stable from negative in September, potentially nudging us closer to an upgrade to investment grade. The Government had hoped that Moody's would upgrade Ireland in the wake of both the promissory note deal in February and the extension of the maturities on some of the European bailout loans.

Mr Corrigan said an upgrade would make a big difference in terms of the so-called marginal borrower.

"The fact that we are in sub-investment grade from Moody's has largely sidelined Asian investors from the point of view of potential interest in the Irish market," he said.

"In all these things it's the marginal investor who makes the difference in terms of moving the yield up and down."


He said an NTMA team was in Asia in recent weeks and met investors in Tokyo.

Mr Corrigan also said that the markets had been relaxed about whether the Government would take out a precautionary credit line or chose to go it alone after the bailout. It comes as Communications Minister Pat Rabbitte said the Government had reached the decision that it was the right time to make a clean break.

"I think it would have been politically impossible (to take a credit line) but it would be politically messy because it would be required to go through the different parliaments," Mr Rabbitte said.

Mr Corrigan said the country was fully funded up until the middle of the first quarter of 2015, but the NTMA would engage with the markets next year by way of pre-funding for the following year.

The NTMA chief said the fact the Government had been able to stick to its targets had been a huge factor. He said the numbers had played out according to the bailout programme which have stood us in "huge stead with the capital markets".

"I would characterise our engagement with the market to date as opportunistic," Mr Corrigan said.

"What we need to do now is to return to a regular programme of issuance and be able to issue regularly. We would target in terms of our working plan a programme of auctions for next year and we would hope to make an announcement around that sometime in early January.

"The thing is to restore normal access to the market which is normally by way of an auction process and that will be the true sign that it is business as usual at that stage."

Irish Independent

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