Thursday 26 April 2018

Moody's set to show faith in Ireland with rating upgrade

Moody's Investors Service
Moody's Investors Service

Maeve Dineen and Thomas Molloy

The State is in line for a major financial boost with ratings agency Moody's set to upgrade the country's credit rating to the much sought-after "investment grade" status.

Moody's is the only major agency that still classes Irish Government debt as risky – so called "junk" investment. That hurts our ability to borrow on the markets.

However, the Irish Independent understands that analysts from Moody's are expected to announce a decision to lift the Irish rating within weeks, following a series of meetings with senior officials from the National Asset Management Agency in Dublin and Washington.

An upgrade would be a major boost for the country just as we prepare to exit the EU/IMF bailout. And it would mean that Irish bonds are no longer classed as high risk by any major debt rating agency.

Many investment funds ban managers from holding lower-rated "junk bonds," and that means countries like Ireland can only borrow from the smaller pool of investors with looser rules.

A ratings upgrade would be a boost ahead of next month's exit from the EU/IMF bailout because it would make it easier for the NTMA to borrow on the markets next year – the crucial test of whether a second bailout can be avoided.

In what is seen as a softening of their stance on so-called European periphery, Moody's upgraded Greece's credit rating on Friday, to "Caa3" from C and with a stable outlook.

Irish borrowing costs have fallen rapidly this year already, and are below countries like Spain and Italy as more and more lenders are convinced the State's financial position is being restored. However investors in Asia and the Middle East, and some more conservative European funds still shy away from Irish bonds.

Moody's is the only major credit rating agency that continues to apply a junk rating to Irish Government bonds. In September it changed its outlook to positive in the first concrete sign that the agency may consider an upgrade. Moody's said at the time that an upgrade would come when the Government made progress in restoring solvency to its public finances.

NEGATIVE

Moody's has consistently been the most negative of the ratings agencies on the eurozone crisis.

Fitch and Standard and Poor's both rate Ireland at BBB+. Moody's currently rates Irish bonds as a sub-investment grade rating of Ba1 – two notches below the other agencies.

Any upgrade by Moody's would be a sign that the Government has convinced a sceptical rating agency that it will meet its financial targets in 2014.

Moody's warned in September that a relaxation of austerity measures could undermine the country's bond ratings.

Irish Independent

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