Just yesterday, somebody told me the Irish credit problem has been solved. With the market indexes trading at or near two-year highs, that would seem to be the case.
But then we get news that Moody’s cuts Irish credit rating by five notches:
Moody’s Investors Service said Friday it has cut its rating on Irish government bonds by five notches to Baa1 from Aa2. The credit rating agency said the outlook for the rating is negative. The downgrade comes after the agency said in November that the most likely outcome for Ireland’s credit rating was a multi-notch downgrade that would leave it within the investment-grade category. “Ireland’s sovereign creditworthiness has suffered from the repeated crystallization of bank related contingent liabilities on the government’s balance sheet,” said Dietmar Hornung, lead analyst for Ireland. As well as the cost of supporting the banking sector, Moody’s said the increased uncertainty over the country’s economic outlook and the decline in the Irish government’s financial strength contributed to the downgrade.
OUCH! Ireland’s credit rating drops 5 notches and the outlook is still negative, which means Moody’s could downgrade it even further.
The sovereign debt crisis is far from over.