S&P re-rating boosts luck of the Irish

Borrowing costs for Ireland have dropped to a record low after the country’s credit rating was raised from BBB to A- on Friday.

Standard & Poor’s, the issuing agency, said that it would consider a further upgrade if there is more evidence to show that Ireland’s economy is growing and its deficit has dropped below 3% of GDP, Reuters reported today. The agency has also increased its growth projections for Ireland, from 2.0% to 2.7% over the next two years.

Thought to result from ECB easing measures unveiled last week, the positive news caused Irish bond yields to drop to a record low this morning, falling 5 basis points to 2.40%. This means that, for the first time since 2007, Irish costs of borrowing have been kept lower than those of the US.

“Ireland’s ratings upgrade adds to the increasingly better news for the peripheral in general but ratings agencies tend to lag what the market is doing,” commented Orlando Green, a strategist at Credit Agricole. “Broadly this is certainly about the market looking at the ECB and what they have done and what they will do in the future, so investors are grabbing yields while they can.“

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