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Dublin: 3 °C Tuesday 12 November, 2019

#Credit Ratings

From TheJournal.ie The 9 at 9: Tuesday 9 At 9

The 9 at 9: Tuesday

Good morning. Here are nine things to know before you start your day.

From TheJournal.ie S&P improves outlook for Irish credit rating after prom note deal Credit Ratings

S&P improves outlook for Irish credit rating after prom note deal

Exchanging promissory notes for long-term bonds “should reduce the government’s debt-servicing costs and lower refinancing risk.”

From TheJournal.ie European Parliament introduces tougher credit rating rules Credit Ratings

European Parliament introduces tougher credit rating rules

Parliament voted in favour of the legislation today in a bid to improve the stability of financial markets.

From TheJournal.ie Eurozone's new bailout fund loses AAA credit rating Downgrade

Eurozone's new bailout fund loses AAA credit rating

The European Stability Mechanism has been downgraded by Moody’s, following a similar drop for France.

From TheJournal.ie Fitch takes Ireland's credit rating off 'negative' watch list Credit Ratings

Fitch takes Ireland's credit rating off 'negative' watch list

Ireland’s credit rating is still only BBB+, but Fitch says it’s no longer expecting to downgrade us again.

From TheJournal.ie Moody's downgrades 15 major banks Banks

Moody's downgrades 15 major banks

Moody’s said the mass downgrade reflected the banks’ ability repay their debts.

From TheJournal.ie Fitch: Yes vote removes uncertainty, but return to markets still 'unclear' Bond Markets

Fitch: Yes vote removes uncertainty, but return to markets still 'unclear'

The ratings agency says approving the Fiscal Compact removes a risk, but doesn’t guarantee a return to the markets.

From TheJournal.ie Moody's in mass downgrade of 16 Spanish banks Debt Crisis

Moody's in mass downgrade of 16 Spanish banks

The ratings agency raised fears over the “creditworthiness” of the country and its ability to support its banks.

From TheJournal.ie Fitch downgrades UK outlook to negative Credit Ratings

Fitch downgrades UK outlook to negative

The nation has held onto its AAA rating but has been warned it could lose its top rating if cut-backs are eased.

From TheJournal.ie Fitch downgrades five eurozone countries - but retains Ireland's rating Eurozone

Fitch downgrades five eurozone countries - but retains Ireland's rating

Italy, Spain, Belgium, Cyprus and Slovenia have all been downgraded by the American ratings agency.

From TheJournal.ie Ratings agency may downgrade Ireland - and 5 other eurozone countries Eurocrisis

Ratings agency may downgrade Ireland - and 5 other eurozone countries

Fitch ratings agency has this evening said it is considering downgrading Ireland, Italy, Spain, Belgium, Slovenia and Cyprus by one or two notches.

From TheJournal.ie Parent banks of National Irish and ACC downgraded by Fitch Credit Ratings

Parent banks of National Irish and ACC downgraded by Fitch

Danske Bank and Rabo Bank are two of five European banks to be downgraded overnight by the ratings agency Fitch.

From TheJournal.ie Second ratings agency set to downgrade EU member states Credit Ratings

Second ratings agency set to downgrade EU member states

Moody’s follows the lead of Standard & Poor’s, complaining about “the absence of measures to stabilise credit markets”.

From TheJournal.ie S&P downgrades major US banks Banks

S&P downgrades major US banks

The agency’s latest credit ratings downgrades include Bank of America, Goldman Sachs and JPMorgan Chase.

From TheJournal.ie Germany leading plans for six-country 'elite bonds' - report Eurobonds

Germany leading plans for six-country 'elite bonds' - report

A report in the ‘Welt on Sonntag’ newspaper says six AAA-rated countries are contemplating plans for common bonds.

From TheJournal.ie Moody's cuts Italian credit rating by three notches Italy

Moody's cuts Italian credit rating by three notches

The agency cuts its rating of Italy for the first time in two decades – as fears continue over over the viability of the Eurozone.

From TheJournal.ie Moody's downgrades two French banks France

Moody's downgrades two French banks

In a widely anticipated move, the credit ratings agency has downgraded Société Générale and Crédit Agricole over fears of the banks’ potential exposure to Greek debt.

From TheJournal.ie Don't worry: US VP heads to China after criticism over downgrade China

Don't worry: US VP heads to China after criticism over downgrade

China was less than kind about the US’s recent downgrading by Standard & Poor’s.

From TheJournal.ie How did ratings agencies become so powerful? Trains and recessions, that’s how Ratings Agency

How did ratings agencies become so powerful? Trains and recessions, that’s how

In the aftermath of the debt downgrade, people are wondering how S&P and the likes became so powerful. Here’s the answer.

From TheJournal.ie Column: Amid unnerved stock markets, it’s time to give NAMA a chance Opinion

Column: Amid unnerved stock markets, it’s time to give NAMA a chance

Nick Leeson believes NAMA is a “necessary evil”, but says it’s time to jettison those developers who can’t work with the agency.

From TheJournal.ie Column: Portugal and Ireland have much in common… and we both need a leg-up Opinion

Column: Portugal and Ireland have much in common… and we both need a leg-up

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.

From TheJournal.ie Rock bottom? Greece gets the lowest credit rating in the world...again New Low

Rock bottom? Greece gets the lowest credit rating in the world...again

Fitch has given Greece a CCC rating, following on from other credit rating agencies last month.

From TheJournal.ie Greece's credit rating now the lowest in the world Credit Ratings

Greece's credit rating now the lowest in the world

Standard & Poor’s drops Greece another three notches and says any restructure will be considered a sovereign default.

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!

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.