Tagged: Rating downgrade

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

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Hungary Credit Rating May Be Cut to Junk After IMF Talks Fail

Bloomberg | Jul 23, 2010

Standard & Poor’s said it may cut Hungary’s credit rating to junk after the collapse of talks with the International Monetary Fund and European Union. Moody’s Investors Service said it may also lower the country’s grade. The IMF and EU on July 17 suspended talks with the government without endorsing Prime Minister Viktor Orban’s plans to control the budget deficit. The creditors provided Hungary with a 20 billion-euro ($25.9 billion) rescue package in 2008, which had served to reassure investors. “We believe that without an EU/IMF program to anchor policy, Hungary is likely to face higher and more volatile funding costs, which in our view could weigh on financial sector balance sheets, the public finances, and economic growth,” S&P said today in a statement. A rating downgrade would raise the cost of borrowing for Hungary at a time when the country is struggling to repair investor confidence after ruling party officials in June compared the country’s economy with Greece. S&P rates Hungary BBB-, its lowest investment grade. The Moody’s rating is two steps higher at Baa1. S&P will lower Hungary’s rating if in the coming year it concludes “government policies are unlikely to result in a meaningful decline in public debt,” it said in the statement.

Forint Falls

Hungary’s currency fell 1.1 percent to 286.83 per euro as of 3:15 p.m. in Budapest. The forint has dropped 8.1 percent in the past three months, making it the worst performer among more than 170 currencies tracked by Bloomberg. The cost of insuring Hungary’s government debt against default rose 14.5 basis points to 343, according to data provider CMA. “Running a higher budget deficit while losing your biggest potential supplier of capital isn’t a good mix,” said Kieran Curtis, who manages $2 billion in emerging market debt at Aviva Investors in London. “The market isn’t going to finance a higher budget deficit without an IMF agreement.” Hungary’s government said credit rating companies “don’t understand” that fiscal responsibility needn’t come at the expense of independent economic policy. “We’re going to continue a disciplined fiscal policy, which doesn’t equal the usual austerity policy that affects families and businesses,” the Economy Ministry said in an e- mailed response to questions from Bloomberg News.  

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Spain Confident on July Redemption, Won’t Need Aid

Bloomberg | April 29, 2010 | 03:26 EDT

Spanish Deputy Finance Minister Jose Manuel Campa Spanish Deputy Finance Minister Jose Manuel Campa said that his country will have no trouble financing 16.2 billion euro ($21.3 billion) bond redemption in July and won’t need to ask for European Union aid as Greece has. Campa said in a phone interview yesterday that Spain would have no problems “at all” financing the redemption, which is the next bond to fall due. Asked if there was any chance Spain would need EU financial help, he said “no.” Spain is “surprised” by a downgrade yesterday from Standard & Poor’s, which is based on overly pessimistic growth forecasts, he said. S&P cut its rating on Spanish debt to AA, putting the nation that was AAA-rated until January 2009 on a par with Slovenia, as it said Spain is underestimating its fiscal problems and overestimating its ability to grow.

The risk premium on Spanish debt rose to the highest in more than a year and the cost of insuring its debt against default reached a record as concerns about Greece’s ability to pay bondholders spilled over into Spanish and Portuguese markets. Campa said the rating move won’t change Spain’s borrowing plan for this year. It will continue to issue a 15-year bond “to ensure it has enough liquidity in the market” and may sell debt in dollars, he said.

‘Strong Demand’

“We have been observing all through our issues throughout the year strong demand for Spanish paper and we expect that to continue,” he said in a Bloomberg Television interview in Madrid today. “We’re planning to continue the funding program throughout the year regularly.” Spanish bonds fell today for a ninth day, pushing  

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