Tagged: Bonds’ sale

Ireland stung by S&P cut, pressure grows over banks

Reuters | Aug 25, 2010 | 7:16pm IST

Ireland’s government faced mounting pressure on Wednesday after a credit rating cut from Standard & Poor’s pushed its borrowing costs higher. After winning plaudits for moving quickly to tackle its deficit, Ireland is once again at the center of European debt fears with investors demanding a whopping 346 basis point premium to hold Irish 10-year debt over German Bunds, the highest level since the Greek financial crisis gripped in May. S&P cut Ireland’s long-term rating by one notch to ‘AA-‘ on fears of a substantially higher bill for supporting the banking sector and assigned a negative outlook, meaning another cut is likely over the next one or two years. Markets want Ireland to put a final price on purging its banks of a decade-long property binge but the head of Ireland’s debt management agency said that was impossible before the year-end.

“It’s a bit like waking up the patient in the middle of an operation to tell him he’s not feeling well,” John Corrigan, the chief executive of the National Treasury Management Agency (NTMA) told Reuters Insider television. “We know the situation is pretty painful but we have to get to the end of the operation which will be in December.” S&P hiked its estimate of the cost to the government of recapitalising the banks at 45-50 billion euros ($63 billion), a figure dismissed by the debt agency in highly unusual criticism. Corrigan described S&P’s analysis as “flawed”. Fellow euro-zone peripheral Portugal managed to raise 1.3 billion euros in bonds on Wednesday but demand was below Ireland’s auction last week and the cost of protecting Irish and Portuguese debt against default rose. Rating agencies have been steadily hacking away at Ireland’s credit rating and S&P’s is now on a par with Fitch and one notch below Moody’s, which cut its rating to Aa2 last month. Both Fitch and Moody’s have stable outlooks. Continue reading