Cyprus downgraded to junk status

International ratings agency Moody’s has downgraded Cyprus’s credit rating by one notch to Ba1.

The move pushes the island into junk status amid heightened concerns that its large banking sector will need state support over its heavy exposure to debt-laden Greece.

Moody’s said today that it is assigning a negative outlook to Cyprus, meaning that further downgrades are possible.

The agency said the additional risk that the Cypriot government will need to prop up the country’s banks is also likely to erode market confidence.

Moody’s is the second agency to nudge the island’s credit rating to junk after Standard & Poor’s did so on January.

Fitch rates Cyprus a notch above junk.