Ireland’s chances of returning to the bond market before its aid program runs out at the end of next year improved after European leaders agreed to let bailout funds recapitalize banks directly, Fitch Ratings said.
“There is a better chance for Ireland now to return to the market,” Gergely Kiss, a director in Fitch’s Sovereign Rating Group in London, said in a phone interview today. “What we saw at the end of last week isn’t a panacea, but it is an encouraging sign.”
The planned sale of 500 million euros ($626 million) in three-month securities by Ireland’s debt agency tomorrow will be a “very important indicator” of market sentiment, Kiss said. He added that last week’s European Union summit may also have positive secondary effects for Ireland in terms of funding.
“This could kick in a virtuous cycle for Ireland where you have more market confidence which is reflected in lower yields, more robust refinancing costs, and that makes the whole debt burden more bearable for Ireland,” he said. Fitch said in a statement last week that sharing bank recapitalization costs “could materially enhance the sovereign credit profile” of Ireland, together with Spain and Cyprus.
Fitch has a BBB+ rating with a negative outlook on Ireland. The ratings company doesn’t see “any further capital pressure for the financial sector” in Ireland after last year’s bank stress tests.
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