On Friday evening, Ireland was upgraded to 'A' from 'A-' by S&P 500. The outlook is 'stable'. Ireland was on 'positive' outlook by S&P, so while the timing of the upgrade was a pleasant surprise it was just a matter of time, in our view.
We expect the positive rating cycle to continue next year. Irish fundamentals should no longer be compared with the periphery but rather with soft cores. In fact, Irish fundamentals are set to outshine Belgium already next year with lower debt, higher current account and stronger growth.
While the upgrade should be supportive for IRISH bonds, we only expect a minor reaction. We expect the next rating 'push' to come from a Moody's upgrade. Moody's is the only agency that still has Ireland below 'A-' level. We expect Moody's to upgrade Ireland again next year as stronger fundamentals than peers also should be reflected in rating convergence.
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