IRELAND’S short-term treasury bill auction this morning seems to have gone rather well. Demand for the six-month treasury bills was ten times more than supply, and saw the bonds sold off with an average yield of 1.978% – compared to a 2.458% yield at the last similar auction just two weeks ago. Eight-month bills were four times oversubscribed with an average yield of 2.35%, down from 2.81%. That that, S&P!
# credit-ratings - Tuesday 12 February, 2013
# credit-ratings - Monday 11 February, 2013
Exchanging promissory notes for long-term bonds “should reduce the government’s debt-servicing costs and lower refinancing risk.”Share63 Tweet
# credit-ratings - Wednesday 16 January, 2013
Parliament voted in favour of the legislation today in a bid to improve the stability of financial markets.Share22 Tweet
# credit-ratings - Saturday 1 December, 2012
The European Stability Mechanism has been downgraded by Moody’s, following a similar drop for France.Share13 Tweet16
# credit-ratings - Wednesday 14 November, 2012
Ireland’s credit rating is still only BBB+, but Fitch says it’s no longer expecting to downgrade us again.Share18 Tweet22
# credit-ratings - Friday 22 June, 2012
# credit-ratings - Tuesday 5 June, 2012
The ratings agency says approving the Fiscal Compact removes a risk, but doesn’t guarantee a return to the markets.Share Tweet11
# credit-ratings - Friday 18 May, 2012
# credit-ratings - Thursday 15 March, 2012
# credit-ratings - Friday 27 January, 2012
Italy, Spain, Belgium, Cyprus and Slovenia have all been downgraded by the American ratings agency.Share1 Tweet15
# credit-ratings - Friday 16 December, 2011
Fitch ratings agency has this evening said it is considering downgrading Ireland, Italy, Spain, Belgium, Slovenia and Cyprus by one or two notches.Share Tweet13
# credit-ratings - Thursday 15 December, 2011
Danske Bank and Rabo Bank are two of five European banks to be downgraded overnight by the ratings agency Fitch.Share Tweet10
# credit-ratings - Monday 12 December, 2011
Moody’s follows the lead of Standard & Poor’s, complaining about “the absence of measures to stabilise credit markets”.Share1 Tweet7
# credit-ratings - Wednesday 30 November, 2011
# credit-ratings - Monday 28 November, 2011
A report in the ‘Welt on Sonntag’ newspaper says six AAA-rated countries are contemplating plans for common bonds.Share1 Tweet10
# credit-ratings - Wednesday 5 October, 2011
The agency cuts its rating of Italy for the first time in two decades – as fears continue over over the viability of the Eurozone.Share1 Tweet3
# credit-ratings - Wednesday 14 September, 2011
# credit-ratings - Wednesday 17 August, 2011
China was less than kind about the US’s recent downgrading by Standard & Poor’s.Share Tweet1
# credit-ratings - Saturday 13 August, 2011
In the aftermath of the debt downgrade, people are wondering how S&P and the likes became so powerful. Here’s the answer.Share1 Tweet9
# credit-ratings - Monday 8 August, 2011
Nick Leeson believes NAMA is a “necessary evil”, but says it’s time to jettison those developers who can’t work with the agency.Share47 Tweet
# credit-ratings - Monday 25 July, 2011
On a visit to Portugal, former trader Nick Leeson finds a country that will find it more difficult to recover than Ireland – and shows that Moody’s got our credit rating dive wrong.Share47 Tweet6
# credit-ratings - Thursday 14 July, 2011
# credit-ratings - Tuesday 14 June, 2011
Standard & Poor’s drops Greece another three notches and says any restructure will be considered a sovereign default.Share Tweet2
# credit-ratings - Thursday 26 August, 2010
# credit-ratings - Monday 19 July, 2010
FINANCIAL NEWS today is dominated by the decision of the Moody’s investor service to downgrade Ireland’s rating from Aa1 to Aa2.
But what exactly does that mean – and will it hurt your pocket? Here’s our explanation of the whole thing.
Basically there are three main worldwide ratings agencies: Standard & Poor’s (or just ‘S&P’), Moody’s, and Fitch. Their jobs are to help investors assess the risk of investments in certain institutions, such as banks – or countries.
The basic function of these agencies, therefore, is to issue credit ratings. These, as you might guess, are broadly similar to the same credit rating an individual person might get.
If you’re good at making loan repayments or have a lot of money in the bank, you’ll get a good rating. If you struggle to repay your debts and don’t have much assets, you’ll get a lower rating and it therefore becomes tougher to borrow.
In essence, the credit rating of a country is just an impartial analysis of how safe it is to lend money to that country. And, as with people, those with higher credit ratings are more likely to negotiate better interest rates.
So how bad is an Aa2?
As the name might suggest, an ‘AAA’ (or “triple A”) rating is the best one the agency can offer, with progressively fewer As being given to lower rankings.
Ireland’s new score of Aa2 is still quite good, though – it’s the third-highest of the 21 different scores Moody’s assigns, and you need to get outside the top ten ratings before they start to refer to you as ‘junk’.
Investment in Irish bonds, according to the ranking, is of “very low credit risk”.
Moody’s actions today aren’t really that much of a shock, though – the move only brings the agency into line with the analysis of S&P and Fitch who have both degraded Ireland’s ratings in the recent past.
The change in rankings was also quite predictable given that the government has taken control of billions in debt through NAMA, meaning its future income is dependent on whether the unpredictable loans of developers and the like will be repaid.
So how will it hurt the country?
We’ll find out soon enough: Ireland is due to raise more cash for itself on world markets tomorrow, when it auctions off €1.5bn in debt in the form of ‘state bonds‘.
Investors buy a bond on the guarantee that Ireland will pay them a higher interest rate over its lifespan, and countries which are considered a risky investment are forced to offer higher interest rates to convince investors to opt in.
Naturally, of course, a higher interest rate means the government, through the National Treasury Management Agency, has to pay out slightly more – and needs slightly more income, through tax, to pay for it.
The last auction, in May, sold four-year bonds at an average rate of 3.11% and ten-year bonds at 4.72% – so we’ll be able to compare tomorrow’s results to that and see how the rating affects us then.Share Tweet
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