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Thursday 18 January 2018

Finances get major boost as agency says outlook now 'stable'

Thomas Molloy and Brendan Keenan

IRELAND received another significant boost last night after ratings agency Standard & Poor's said the outlook for the national finances has improved to "stable" from "negative" after last week's deal on the promissory notes.

It is only the second time since the financial crisis began in 2007 that any rating agency has raised Ireland's rating.

"We believe the success of the exchange increases the likelihood of a full return by Ireland to private financing and, therefore, of Ireland successfully exiting the EU/IMF bailout programme at the end of 2013," S&P said in a statement after the markets had closed.

Yesterday's decision makes Irish bonds more attractive to investors and makes it more likely that foreign pension funds will buy them.

That should reduce borrowing costs which are already lower than they were at any time in the last eight years.

The upgrade was welcomed by National Treasury Management Agency chief executive John Corrigan, who said they had been hoping for an outlook change from S&P for some time. The deal on the promissory notes appeared to have copper-fastened it, he said.

The NTMA attention will now focus on the biggest ratings agency, Moody's, which still rates Irish bonds as below investment grade or "junk" to use bond traders' jargon.

"We will be talking to Moody's at a meeting in March," said Mr Corrigan. "A one-step upgrade to investment grade would be helpful because it would bring in more investors such as insurance companies and pension funds as possible lenders to Ireland."

S&P said in a statement that last week's deal should reduce the Government's debt-servicing costs and lower refinancing risk.


Rival agency Fitch became the first major agency to hike Ireland's rating back in November when it changed its outlook for the country to a higher "stable" ranking because the risks surrounding the Irish financial adjustment path had "narrowed and become more balanced".

Moody's has held back from upgrading our debt ranking, but has been positive about how the crisis has been tackled.

A deal on the Anglo promissory notes, or a real pick-up in economic growth, could help catapult Ireland back into the coveted "investment grade" rating territory, a Moody's analyst told the Irish Independent late last year.

Moody's praised a "relatively predictable policy framework, commitment to fiscal consolidation and structural reforms" among the country's strengths. It also noted that Ireland is meeting all the targets set under the bailout programme.

Still, Moody's has warned in the past that Ireland's growth prospects remain weak because of budget cuts, on-going deleveraging in the private sector and subdued external demand.

Irish Independent

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