Ireland set to secure Moody’s upgrade

Ireland looks set to get its long-awaited investment grade star of approval from ratings agency Moody’s which has stubbornly kept Ireland as a junk investment since 2011 despite the improvement in the country’s economy.

The ratings agency is set to deliver its verdict on Ireland next Friday, when it is expected that they will upgrade the Irish sovereign debt rating to AA3 meaning high quality and very low credit risk.

Moody’s analyst Kristin Lindow said that the success of the Irish bond auction earlier this week was a positive indicator when considering whether or not to upgrade Ireland’s debt rating, but she added that it has no direct relationship to the Moody’s rating.

Irish sale of 10-year bonds this week “confirmed broad investor appetite for the Government’s debt at quite low yields, which is credit positive as the authorities undertake the next steps to regain debt sustainability amid a strengthening domestic recovery,” she said.

Davy’s global strategist, Donal O’Mahony, said that Moody’s reasoning for holding Ireland at a junk rating of Ba1 had been that a risk that the company might not be able to access international markets still existed.

“When Moody’s restored a “stable” footing for Ireland’s credit rating last September (albeit at its highly controversial Ba1 perch), it cited “progress in the restoration of public finances and diminished susceptibility to loss of market access”.

“It is fair to say, therefore, that any residual concerns this rating agency may have harboured regarding Irish funding prospects have now been consigned to the scrap-heap in light of this week’s events,” he said.

Davy’s believe that when Moody’s revisits the Irish rating next week they will finally upgrade Ireland, as the company’s own estimate based on the probability of default rates Ireland as A3.