Irish government bonds are suffering in the wake of today’s downgrading of Ireland’s credit rating, as the credit ratings agency Standard & Poor’s brought Irish ratings in line with several other major agencies.
Irish government credit ratings have fallen across the board of the last year, with S&P joining Moody’s and Fitch as the latest credit agency to acknowledge problems in the current Irish economic outlook.
The upshot of the credit rating downgrading, which took Ireland to AA- rating, is that national debt is more expensive to service and borrowing from the markets comes at a higher rate of interest to reflect the increased risk of default. Likewise, the cost of insuring government debt against default has risen considerably on the back of the announcement, which it is thought will further compound Ireland’s economic problems as it struggles to recover from the impact of the global recession.
However, the news has been rejected by the National Treasury Management Agency, who have today maintained that the S&P analysis of the Irish debt outlook was based on flawed logic and overestimated figures.
Notably, John Corrigan of the NTMA cited an overestimation of roughly 100% of the cost of the banking sector bailout, in contrast with government estimations, and also an underestimation of the value of Irish debt security and government assets.
Irish economic turbulence has led to considerable unrest in its markets, and has left some analysts in doubt of the feasibility of economic growth targets. It is thought that today’s downgrading will do nothing to ease the present situation.