Citing growing bank liabilities, weaker growth, and reduced revenue streams for the government, MoodyÃ¢â‚¬â„¢s pulled the trigger on a downgrading of IrelandÃ¢â‚¬â„¢s credit rating earlier today. The New York-based ratings agency dropped IrelandÃ¢â‚¬â„¢s rating from Aa1 to Aa2 Ã¢â‚¬â€œ Ã¢â‚¬Å“AaÃ¢â‚¬Â suggests that MoodyÃ¢â‚¬â„¢s still rates Irish debt as having very low credit risk, but the long-term risk is now a greater concern and this is reflected in the change from 1 to 2 in the rating grade.
Longer-term growth fears were confirmed in comments made by MoodyÃ¢â‚¬â„¢s analyst Dietmar Hornung. When explaining the downgrade, Hornung noted that the rating change does not reflect a Ã¢â‚¬Å“sudden, dramatic shiftÃ¢â‚¬Â, but does take into consideration fears of a Ã¢â‚¬Å“gradual, significant deteriorationÃ¢â‚¬Â.
Ã¢â‚¬Å“TodayÃ¢â‚¬â„¢s downgrade is primarily driven by the Irish governmentÃ¢â‚¬â„¢s gradual but significant loss of financial strength, as reflected by its deteriorating debt affordability,Ã¢â‚¬Â said Hornung.
It was almost exactly a year ago that MoodyÃ¢â‚¬â„¢s last revamped its rating for Ireland,when it dropped IrelandÃ¢â‚¬â„¢s bond credit rating to Aa1 but with a Ã¢â‚¬Å“negativeÃ¢â‚¬Â longer-term outlook. Today, MoodyÃ¢â‚¬â„¢s upgraded the outlook to Ã¢â‚¬Å“stableÃ¢â‚¬Â, saying that it expects economic growth to be positive for the next three years, but falling short of IrelandÃ¢â‚¬â„¢s historical growth rate.
The downgrade will certainly increase the governmentÃ¢â‚¬â„¢s cost to borrow, but an ING Group NV spokesperson said they expect tomorrowÃ¢â‚¬â„¢s debt sale to still be successful. An estimated Ã¢â€šÂ¬1.5 billion of five and ten-year bonds is expected to be sold at tomorrowÃ¢â‚¬â„¢ auction.
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