Usually all you see is a ratings downgrade and an affirmed “negative outlook” when it comes to the sovereign credit ratings of Portugal, Italy, Ireland, Greece, and Spain. That is not the case today. Fitch ratings has revised its ratings on Ireland to Stable from Negative. While a technical upgrade would be the lifting of a formal rating, simply removing the Negative outlook in favor of a Stable outlook is something which should be worth noting.
Fitch said, “At the same time, the agency has affirmed the Long-Term foreign and local currency Issuer Default Ratings (IDRs) at ‘BBB+’. Ireland’s Country Ceiling has been affirmed at ‘AAA’ and Short-term foreign currency IDR at ‘F2′. The ratings of guaranteed issuance by National Asset Management Ltd (NAMA) have also been affirmed at ‘BBB+’ and ‘F2′, in line with the sovereign ratings.”
Today’s news is said to reflect Ireland’s “continued progress with its fiscal consolidation, external adjustment and economic recovery, as well as the sovereign’s improved financing options. Fitch judges that the risks surrounding the adjustment path have narrowed and become more balanced.”
Ireland has so far met its quarterly fiscal targets and the nation’s policy has successfully managed to meet the fiscal targets without excessive adverse impact on economic growth even if more adjustments are needed to bring the deficit below 3% by 2015. The flat or no growth expected this year is also still better than that of the Euro zone and is far better than the peripheral nations in the Euro. Fitch even pointed out that Ireland has been able to return to the capital markets and has had to pay lower yields.
We have not seen any improvement in Irish related plays in New York. The Bank of Ireland (NYSE: IRE) ADRs are trading down 0.3% at $5.27 and The New Ireland Fund, Inc. (NYSE: IRL) is down almost 2% at $8.45 today. In the world of ETFs, the iShares MSCI Ireland Capped Investable Market Index (NYSEMKT: EIRL) is trading down by 1.3% at $21.95.
JON C. OGG