Moody’s move criticised as ‘cynical and manipulative’

BROKERS have called the move by ratings agency Moody’s to cut Ireland’s credit rating to junk as “cynical and manipulative”.

Bloxham said the downgrade comes just before the EU/IMF are expected to praise Ireland for meeting all its bailout targets.

The stockbrokers said the bottom line is that the credit ratings agencies have “far too much power” but that policymakers and regulators only have themselves to blame.

Moody’s cut Ireland’s rating by one notch on Tuesday to Ba1 from Baa3 and kept a negative outlook on the rating. Ireland became the third euro zone member state to lose its investment grade status from the agency.

Bloxham said the downgrading is disappointing and is at odds with all the other major ratings agencies — Standard & Poor’s, Fitch and DBRS — which all kept Ireland in the investment-grade band.

“Furthermore, the Moody’s rating action does not appear to reflect the agreement by eurozone finance ministers late on Monday to cut the cost of loans from the bloc’s rescue fund and extend their maturity,” said Bloxham.

The stockbrokers said this will bring on some forced selling by investors who are not allowed to hold non-investment grade securities and, as well as that, Ireland’s bonds will be dropped from some of the bond indices.

Analyst at Davy stockbrokers Conall Mac Coille said: “The downgrade to non-investment-grade status will impair the ability of the sovereign to re-engage with private markets when the current EU/IMF deal runs out in mid-2013.”

Goodbody analyst Juliet Tennent said the downgrading of Ireland’s credit rating to junk by Moody’s will further sour sentiment towards the sovereign and the euro zone.

“While one would expect that the majority of ratings-sensitive deposits have already left the banking system and that the majority of institutional investors are already underweight sovereign debt, it does make the road back to a self funding position for Ireland and the banks more difficult,” she said.