Bloomberg News

S&P Raises Spain’s Outlook to Stable; Netherlands Cut

November 29, 2013

Spain Rating Outlook Raised at S&P as Economic Expansion Resumes

The Ford Espana SL plant, operated by Ford Motor Co., in Almusafes, Spain. Photographer: Angel Navarrete/Bloomberg

Spain’s debt outlook was raised to stable from negative by Standard & Poor’s, which cited a resumption in economic growth, reducing chances the ratings company would cut the nation’s score to junk.

The ratings company also lowered the Netherlands to AA+ from AAA, citing weaker growth prospects than previously anticipated. That reduces the number of countries with top grades from all three main ratings companies to 10. S&P also raised its score for Cyprus to B- from CCC+.

Global bond yields showed investors ignored 56 percent of Moody’s Investors Service and 50 percent of S&P’s rating and outlook changes last year, more often disagreeing when the companies said governments were becoming safer or more risky, data compiled by Bloomberg show. Spain emerged from a more than two-year recession in the third quarter and the main Ibex 35 stock index has risen about 21 percent this year as foreign investors returned to the market.

“We see improvement in Spain’s external position as economic growth gradually resumes,” S&P said in a statement as it affirmed Spain at BBB-, the lowest investment grade, and removed the negative outlook on the debt that was introduced in October 2012.

Spain first lost its top credit rating at S&P in 2009 and hasn’t been upgraded by any of the three main rating companies since.

Euro Strengthened

The cost of insuring against a French default fell to the lowest in more than three years on Nov. 8, as investors ignored a sovereign-credit rating downgrade by S&P earlier that day.

Spain’s benchmark 10-year government bond yields have declined 15 basis points so far this quarter and closed at 4.15 percent yesterday. Yields on similarly dated Netherlands sovereign debt have fallen 14 basis points to 2.03 percent. A basis point is 0.01 percentage point.

The euro has strengthened 0.7 percent against the dollar since Sept. 30, the biggest gain among 16 major peers after the South Korean won and the British pound.

To contact the reporters on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net; Shamim Adam in Singapore at sadam2@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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