Moody’s Rating Decisions Impact Italian and Portuguese Sovereign Debt Risk Premiums

2023-11-20 08:35:08
The risk premium required by investors to hold Italian and Portuguese sovereign debt fell slightly on Monday, a sign of some relief, after the decisions of the rating agency Moody’s on these two countries. Moody’s on Friday maintained Italy’s sovereign debt rating at Baa3 – one notch above junk – and raised its outlook from negative to stable. Most analysts, however, did not expect Moody’s to downgrade its outlook, with some even forecasting an improvement. The rating agency also raised Portugal’s long-term issuer rating by two notches, from Baa2 to A3, despite the political crisis caused by the resignation two weeks ago of Portuguese Prime Minister Antonio Costa. . The spread between Italian and German 10-year bonds DE10IT10=RR – an indicator of how investors perceive risk on Italy’s debt – fell to a new two-month low on Monday , at 171.4 basis points. Around 08:25 GMT, this gap stood at 172.7 points, compared to 172 on Friday, its lowest level since September 21. A week ago it was still around 185 points. The spread between Portuguese and German ten-year yields DE10PT10=RR decreased by two basis points to 58.7 points. (Reporting Stefano Rebaudo, French version Claude Chendjou, editing by Kate Entringer)
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