International bond market review
Spain will probably lose its Aaa credit rating after the country was put under review for possible downgrade in June, Moody’s Investors Service said. “Spain is very highly rated and I can’t say where that rating will end up, but it’s likely to go down a bit,” Steven A. Hess, senior credit officer at Moody’s, said in an interview in Sydney yesterday. Spain’s classification may be lowered as much as two grades, Moody’s analysts said on 30 June.
Iceland’s government said it’s a long way off defaulting on its debt payments after Moody’s Investors Service warned it may lower the island’s credit grade to junk, arguing lenders could require state support. Moody’s is “taking it too far,” Economy Minister Gylfi Magnusson said in an interview yesterday, after the rating service cut the outlook on Iceland’s Baa3 foreign currency debt to negative. Moody’s said it will lower the rating to junk if a June court ruling banning some foreign loans hurts the recovery or forces the government to raise debt levels by bailing out the banks.
Iceland’s foreign debt is graded junk by Fitch Ratings, while Standard & Poor’s gives the island its lowest investment grade.
Ukraine’s credit ratings were raised by Standard & Poor’s after the International Monetary Fund approved a new $15.2 billion loan program for the country. S&P raised its long-term foreign currency ratings on Ukraine by one level to B+ from B and the long-term local currency rating to BB- from B+, the company said in a statement late yesterday. The ratings were removed from CreditWatch.
Chile sold its first international bond in six years at a record-low yield as investors demanded less than half the premium on comparable debt from higher-rated Italy. Chile sold $1 billion in 10-year notes in dollars yesterday to yield 3.89 percent, or 90 basis points over the yield on the 3.5 percent 10-year U.S. Treasury Note.