Shares plunge after Moody's cuts Irish grade
By Shawn Pogatchnik |
July 20, 2010, Tuesday
|
Print Edition
Print Edition
THE Moody's agency cut Ireland's credit rating yesterday, citing the country's swelling national debt, the unpredictable cost of its bank bailout plans and its weak growth prospects for the next three to five years.
Shares on the Irish Stock Exchange slumped after Dietmar Hornung, Moody's lead analyst for Ireland, announced that the New York-based agency was dropping its credit-worthiness rating one notch to Aa2. Moody's previously cut Ireland's rating to Aa1 from the top grade, Aaa, in July 2009 as Ireland plunged into its worst recession since the 1930s Great Depression.
Hornung cited what he called "the Irish government's gradual but significant loss of financial strength as reflected by its deteriorating debt affordability."
However, Ireland's National Treasury Management Agency or NTMA - responsible for managing Ireland's ballooning government debts - welcomed Moody's accompanying decision to raise its outlook on the risk of loaning money to Ireland to "stable" from its previous "negative" rating. That suggests no more downgrades in coming months.
"We'd prefer not to have a downgrade, but there is still a lot of good news in (the Moody's report)," said Oliver Whelan, NTMA's director of funding and debt management.
Today the agency plans to auction 1.5 billion euros (US$1.95 billion) in six-year and 10-year government bonds paying annual interest of 4.6 percent and 5 percent respectively. It represents Ireland's latest effort to drum up enough money internationally to keep covering a shortfall in tax collections since 2008, when Ireland's banking and property-dependent economic boom imploded.
However, analysts said the new Irish bonds were likely to be purchased in full.
Shares on the Irish Stock Exchange slumped after Dietmar Hornung, Moody's lead analyst for Ireland, announced that the New York-based agency was dropping its credit-worthiness rating one notch to Aa2. Moody's previously cut Ireland's rating to Aa1 from the top grade, Aaa, in July 2009 as Ireland plunged into its worst recession since the 1930s Great Depression.
Hornung cited what he called "the Irish government's gradual but significant loss of financial strength as reflected by its deteriorating debt affordability."
However, Ireland's National Treasury Management Agency or NTMA - responsible for managing Ireland's ballooning government debts - welcomed Moody's accompanying decision to raise its outlook on the risk of loaning money to Ireland to "stable" from its previous "negative" rating. That suggests no more downgrades in coming months.
"We'd prefer not to have a downgrade, but there is still a lot of good news in (the Moody's report)," said Oliver Whelan, NTMA's director of funding and debt management.
Today the agency plans to auction 1.5 billion euros (US$1.95 billion) in six-year and 10-year government bonds paying annual interest of 4.6 percent and 5 percent respectively. It represents Ireland's latest effort to drum up enough money internationally to keep covering a shortfall in tax collections since 2008, when Ireland's banking and property-dependent economic boom imploded.
However, analysts said the new Irish bonds were likely to be purchased in full.
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