Spanish sovereign bond purchases by European rescue funds are unlikely to hurt the nation’s credit rating as the aid may help the country overhaul its economy, Fitch Ratings said.
“Such external support could provide Spain with the breathing space to implement its ambitious fiscal and economic reforms,” Fitch Ratings said in an e-mailed statement today.
Bond purchases by the European Financial Stability Facility or European Stability Mechanism would significantly “reduce the risk of a self-fulfilling liquidity crisis,” especially if supported by secondary market purchases by the European Central Bank, it said.
Fitch is the second rating company after Standard and Poor’s this week to view bond buying as possibly positive for Spain’s credit rating. The statements come as Prime Minister Mariano Rajoy is considering requesting more aid to help lower the nation’s borrowing costs.
Spain is rated BBB+ at S&P, three levels above non- investment grade. It has a BBB rating at Fitch Ratings -- two levels above junk, while its Baa3 grade at Moody’s Investors Service is the lowest investment grade rating.
The yield on Spain’s 10-year benchmark bond was at 6.4 percent as of 1:03 p.m. in Madrid, down from a euro-era high of 7.75 percent on Aug. 25.
Fitch said the move would be positive as long as Spain retained access to markets. The credibility of Rajoy’s overhaul of the euro area’s fourth-largest economy may be helped by the conditionality imposed in return for aid, Fitch said.
Spain has urged the ECB to commit to unlimited support in possible debt buying operations after ECB President Mario Draghi announced proposals earlier this month to re-enter the bond market.
The nation signed off last month on as much as 100 billion euros ($125 billion) of aid from European rescue funds to shore up banks burdened with bad loans.
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