Friday, July 13, 2012

Eurozone sovereign bond ratings

Today’s downgrade of Italian government bonds by ratings agency Moody’s was a little unexpected.  Here is a table of the rating of all 17 eurozone members with the three main ratings agencies, Standard and Poors, Fitch and Moody’s. 

The ratings classifications along the left hand side are used by S&P and Fitch (though they do give them different descriptions) while those on the right are used by Moody’s.

Bond RatingsIt is starting to get a little crowded at the towards the bottom of the investment grades.  Greece and Portugal have “junk” status with all three agencies.  Ireland was given a similar status by Moody’s this time last year.  Twelve months later than could be viewed as a premature move by the agency.

S&P have Ireland at the same ratings notch as Spain and Italy while with Fitch Ireland is one notch below Italy and is actually one grade above Spain.  This relative ranking is not maintained by Moody’s which has below both (two notches below Italy and one below Spain).

The only other instance where there is not a consistent relative ranking across the three agencies is Malta’s rating with S&P.  Both Fitch and Moody’s have Malta as least as high or above all of Estonia, Slovakia and Slovenia.  S&P have Malta below all three.

Moody’s could, of course, come into line with the other two in the relative ranking of Ireland, Italy and Spain.  However to do this, Moody’s would, of course, have to bring Italy and Spain to “junk” status as this is the only way they could have a rating equal to or below Ireland’s current Ba1 rating with them. 

This could happen but the junking of either Italy or Spain would be a major event.  Alternatively, Moody’s could upgrade Ireland to investment grade status but an increase in the sovereign bond rating of any eurozone country would be an equally noteworthy event. 

There is little to suggest that such an upgrade is warranted unless it was to acknowledge that the initial downgrade to “junk” status was a bit hasty.  And ratings agencies could never make a mistake, could they?

1 comment:

  1. Paddy Power are offering 9/1 for Ireland to be Baa3 or higher with Moody's by 31/12/12.