Citi analysts said in a note Monday that Moody's (NYSE:MCO) downgrade of Israel's credit rating from A1 to A2 was widely expected and at least partially priced.
Moody's also changed its outlook for the rating to negative and posted a statement focused on geopolitical risks and institutional quality.
Citi noted that the rating is still five notches above "junk" level, on par with countries like Poland, but that the negative outlook means further downgrades are possible.
The negative outlook and the domestic political reaction was not as expected, according to Citi.
"Other rating agencies could plausibly follow this move, with the S&P rating (AA-, 7 notches above 'junk') perhaps looking most at risk," said the investment bank's analysts.
"The market reaction in coming days will likely be a factor in the Bank of Israel's upcoming rate decision," they added.