Moody’s Holds Spain’s Credit Ratings

By TraderVox.com

Tradervox.com (Dublin) – Moody’s Investors Service held it credit rating for Spain, citing the reduced risk of losing market access as a result of European Central Bank willingness to buy the nation’s sovereign debt. Moody’s kept the Baa3 credit rating for Spain and assigned a negative outlook after concluding on the review whether Spain should be downgraded further. The institution had started the review in June as financial institutions started experiencing problems. Spain‘s rating is one step above the junk rating, where other euro region countries experiencing debt crisis have been rated. These countries include Cyprus, Greece, Ireland, and Portugal. Moody’s and Standard & Poor’s rating companies have held Spain’s rating one step above the junk level while Fitch Ratings have awarded Spain a BBB rating which is two steps above junk.

According to Moody’s analyst Kathrin Muehlbronner, the willingness shown by the ECB to buy Spain‘s government bonds in the secondary market has been an important step which was considered by the rating company when assigning the credit rating. In an interview from London, Kathrin said that she expects Spain to ask for precautionary credit line from the ESM in order to activate bond buying by the region’s central bank. Financial institutions were boosted with 100 billion euros from European Union after Mariano Rajoy, the Nation’s Prime Minister requested for aid to prevent the country from missing its budget deficit.

Downgrading Spain’s credit rating, Moritz Kraemer, S&P’s head of sovereign ratings in middle east, Africa and Europe said that the uncertainty in contributed to the downgrade. The Spanish benchmark yield dropped in the recent auction reaching 5.8 percent yesterday. This has reduced pressure on Spain to request for bailout before October 21 when the regional elections will be held. Investors are shunning the nation’s bonds as they wait to see the next move after the election and the European Union Summit, which will start tomorrow.

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