Moody’s upgrade set to support NTMA’s efforts to sell debt

Moody’s, the ratings agency, has upgraded its outlook for Ireland’s national debt, indicating that it will consider improving the actual rating in the coming months. The move continues the gradual upgrading of Ireland’s rating by the agencies over the past few years and should support the National Treasury Management Agency’s efforts to sell debt in to the market.

Moody’s currently rates Ireland as Baa1 and an upgrade would move Irish debt to an A rating. Yesterday Moody’s upgraded the outlook for Irish debt from stable to positive, indicating that an upgrade may be on the way, provided conditions do not deteriorate.

Upgrade overdue

Market analysts believe an upgrade is overdue, given the low interest rate at which Ireland is currently able to raise debt on the market. The other two main agencies, Standard&Poor’s and Fitch both already assign A ratings to Irish debt.

Moody’s said the improved outlook reflected stronger economic growth, budget improvements and a falling debt ratio. However they said that Ireland’s debt ratio of around 100 per cent of GDP remained higher than most A rated countries.

Investment funds and sovereign wealth funds use ratings to help to decide where to invest, so a higher rating helps to sell debt at a lower cost.

Ireland’s debt rating with the three agencies has moved upwards, based on a revival of economic growth, a reduction in the deficit and, more recently, falls in the debt to GDP ratio. This, combined with an unprecedented period of low interest rates on world bond markets, has allowed the NTMA to raise funds at exceptionally low rates.