Spain avoids “junk” status credit rating downgrade

17^th October 2012

Max Marioni

Max Marioni

17 October 2012

Credit rating agency Moody’s has announced today that it will be keeping Spain’s credit rating at its current level. This confirms Spain’s investment status, although it assigns a negative outlook to the country’s credit worthiness.

The credit rating review was finalised after many months of speculation about a possible downgrade of Spain’s rating to “junk” status, which would have lead to even higher borrowing costs.

In an accompanying statement, Moody’s explained that: “the combination of Euro area and ECB support and the Spanish government’s own efforts should allow the government to maintain capital market access at reasonable rates, providing it with the time it needs to stabilise public debt over the next few years.”

The markets have taken the news as a vote of confidence in the country’s economy, and Spanish bond yields have decreased sharply this morning. Madrid’s stock market has also rallied, with the IBEX index gaining 1.5% after trading started.

The Euro has also made gains against the Dollar, trading above $1.31 for the first time since last month.

Moody’s was expected to follow in the footsteps of S&P, which last week downgraded Spain’s bonds by two notches to its lowest investment grade. It is the first time Moody’s has not downgrade a country after conducting a credit review since 2010.

Max Marioni