Moody's Credit Rating of Ireland

Clearly Moody’s is about to remove the 'junk status of Ireland’s debt

(this is despite the fact that on a like-for-like basis adjusting for the effect of US multi-nationals on Ireland’s GDP, Ireland’s sovereign debt exceeds Greece (see link below)

(despite the fact that Ireland’s overall economy is much more levered than Greece)?

Noonan makes the following quote:

Without the EU / Draghi, Ireland would be wholly insolvent and un-financeable - there are few other entities out there as leveraged as Ireland.

The only reason why Irish Gov bond yields have come down is because Draghi gave Irish banks tens of billions in interest free loans to buy EU sovereign debt (and implicitly guaranteed it). They have bought so much of it they have brought the yield on a ‘junk’ rated sovereign to 3%. There are downsides to this trade (Draghi’s Doom Loop by the markets).

Noonan should read the memos he gets from the Dept. of Finance more often !

Released from Gandon Alternative Fund Management yesterday (and Irish Hedge Fund)

On Ireland’s ‘Google’ phantom economy

On Ireland’s Banking zero foreclosure rate

The fact that Irish spreads (over bunds or swaps) are now low for a reasonable time frame (reasonable in the context of Moodys analyst time frame) means a re-rating is inevitable, it’s just a queison timing now.

I’m sure they’ll tell a nice story when they do.

Ireland warned to cut €2.5bn next year
European Commission says planned €2bn adjustment will not be enough to meet deficit target

The EU is aware is Ireland’s true financial position and it indebtedness net of Google’s tax planning (evasion)

Ireland’s GDP (including Google etc.) is 170bn
Ireland’s effective GDP (ex. Google etc.) is c. 135bn
2.5bn on 135bn just under 1.9% - or in layman’s terms a deep self induced recession (again)
Perhaps the IDA / Irish Revenue / Central Bank will give Google more incentives to further pump Ireland’s GDP to offset this? … -1.1622407

Looks like somone in Moody’s can count.
Hard to believe you could ‘upgrade’ a banking system that has had virtually 0 foreclosures
Still … I hear very confident soundings that such an upgrade is coming ? :confused:

Sure Noonan will be out to tell us its all ok fairly soon.

NTMA latest debt projections.
Absolute level of debt keeps rising but falls as % of GDP (which only rises from US multi-nationals tax planning)
For some reason the NTMA don’t express our Debt as % of GNP or GNI (figures less effected by Google’s tax planning)
Funny how the institution charged with managing our debt wouldn’t want to understand this given that is it critical to debt sustainability?

Debt Projections
Projected General Government Debt / GDP Ratio 2012-2016

Year % GDP Total
2012 117.4 192.5
2013 (e) 124.1 205.9
2014 (f) 120.0 204.7
2015 (f) 118.4 209.4
2016 (f) 114.6 211.6

Very good article today on Reuters on why PIGS bond yields have fallen so quickly.
And the why the risks are building up in domestic banks, stuffed with vast amounts of their own PIGS debt to earn free carry.
(remember the Greek banks in 2009/10).

Hard to believe - as they will - that Moody’s can rate such a scheme as not being junk (unless the ECB formally guarantees the PIGS debt)?

Moody’s downgrade deposit ratings of BOI, AIB and PTSB … _PR_288868

Moody’s reviewing AIB and BOI covered bond programs for downgrade … -400030971

Not a peep of this reported in our newspapers or on the telly as far as I can see.

So a country with the following set-up:

  1. Highest Sovereign Debt and Deficit to GDP in the OECD (on a proper like-for-like basis).
  2. Almost Highest Consumer Debt to Disposable Income in OCED.
  3. Banking system that is so insolvent that it has zero foreclosures 5 years into the crisis.
  4. No natural resources / indigenous industries to rely on (ex. who avoid most taxes + have non-mortgageable labour)
  5. Leading industry (helping Google-types avoid taxes), makes a tiny contribution to economy (but massively distorts GDP).
  6. IDAs record of attracting Google-types is that they have created almost zero net new jobs in a decade?
  7. Bond yields now sub 3% on the back of the insolvent Irish banks buying almost all Irish sovereign debt using 0% ECB money.
  8. Government now re-classifying jobs statistics to create phantom 56,000 jobs in 2013.

Sounds like a ‘investment grade’ situation to me ?!

In fairness, their analysis was muck when they were giving positive ratings so we should apply the same level of scepticism for their negative ratings too.

Hedge Fund Slams Portuguese Bonds With 64 Page Slideshow

Full presentation is here:

Interesting presentation on case for shorting Portuguese Debt by US Hedge Fund.

Ireland appears regularly in the slides as a comparison - would be interested to see if he adjusted for Ireland’s ‘true’ GDP (as posted above) - we would be the subject of his trade!

The ECB’s back stop of PIIGS debt via repos could turn these kind of trades into ‘widow makers’ (as the BOJ did for years on Japanese Gov. Debt with US hedge funds).

The more I think about it, the ECB is committed to the current course of directly / indirectly getting all Euro area yields down. Whatever about the balance sheet / wealth transfers, it makes for happier citizens everywhere (Germany to Spain).

It doesn’t mean that the ECB / EU is going to do anything more and there will be much hardship within PIIGS countries to get their total debt down (regardless how cheap the ECB make it).

I would be more comfortable waiting for moments when the ECB gets itself back into a knot and temporarily stops supporting PIIGS debt and yields explode, and then going long.

Every reversion to a crisis will only re-emphasise the validity of Draghi’s current actions.

Rightly or wrongly …

Boost for economy as State’s debt finally upgraded from ‘junk’ status

Seriously though as someone who hopes to make money by buying and selling bonds or any other asset that matter, Moody’s advice is about as useful as a one legged man at an a*se kicking party.

Although Might have some use as a contrarian indicator.

How can they downgrade the Irish banks debt but upgrade the sovereign?

They really are some scam artists

Bail-ins reduce sovereign exposure to failing banks?

I guess that’s the only logical explanation. But given how linked sovereign and bank debt have been (and must still be if the proverbial hit the fan again) it seems a bit of a stretch I think

Ireland regains (blemished) A rating from S&P

S&P upgrades Ireland to “A+ stable”

Interesting. that would be a very positive result.

I’m not sure I agree with the following though!