The credit rating agencies - remember them? Once upon a time, their word was Gospel. But, in time, it turned out that their word was made up of some triple-A rated but toxic portfolios and then we hated them. We hated them even more as they downgraded much of Europe's sovereign debt as the eurozone crisis deepened. Here in Ireland, Moody's came in for particular ire as it downgraded Irish sovereign debt to junk status.
To some extent, the precipitate actions of the ratings agencies (where those actions were precipitate) was driven by a need to seize the initiative from the markets. They had lost credibility by rating as AAA all sorts of toxic and subprime loans. Credit rating agencies need to be ahead of the curve. Their job is to tell the markets how it is, not the other way around.
Well, in the case of Moody's and its view of Ireland, they've been badly wrong-footed over the last few months. Clearly, they didn't expect the country to regain market access so quickly and now they find themselves in the laughable situation where they still rate Irish sovereign debt as below investment grade while for several months now, investors have been piling in to over-subscribed Irish auctions. They're being roundly ignored.
Today's Cantillon column in the Irish Times (it's not online for some reason ) makes the point that while Moody's "may evaluate its position [on Ireland] any day now", it does have a difficulty in "how to extract itself without looking as if it is just following the market".
An upgrade from Moody's would mean yet more investors for Irish bonds since the mandate of many funds precludes them from holding bonds rated as junk by one of the big three credit rating agencies. So, until Moody's unhoist themselves from their own petard, we'll have to wait.... and suppress the urge to smile.
Moody's wrong to have a negative view on Ireland - Irish Independent