Rebel Traders – Analysis Without The Hype

Breaking News…

Moody’s cuts Ireland’s sovereign rating by one notch to Aa1 from Aaa; Outlook Negative

Rationale behind the downgrade stems from three key drivers of our credit analysis regarding debt: affordability, finance-ability and reversibility — which for Ireland are weakened as compared to Aaa peers.

Negative outlook reflects the risk of a further gradual deterioration in terms both of debt affordability — the share of government revenues used for interest payments — and finance-ability — the cost at which Ireland can raise further debt.

Moreover, Ireland’’s ability to reverse the negative debt dynamics in a non-supportive global environment will be tested. Debt dynamics will remain unfavourable for several years, and, in Moody’’s opinion, downside risks outweigh upside risks in the near to medium term. The pronounced weakness in the economic activity has been translating into a severe deterioration of Ireland’’s public finances, and the country is set to emerge from the current economic crisis with a considerably higher debt burden for the foreseeable future (Source: Moody’s)

The cost of purchasing insurance against Irish Government bonds rose to record high levels on Friday, having tripled in just one week as fears mount that the Irish Government may default on its rising debt.

The cost of insuring Irish debt hit 350 basis points on Friday, meaning that for every £100 of debt it would cost £3.50 to insure against default. A year ago it would have cost 10p to insure every £100 of Irish debt.

Ireland, like so many other nations around the globe are experiencing growing problems related to the banking industries. Ireland’s current pledges to support its banking sector amount to 220% of the Ireland’s annual economic output. This enormous commitment to support the banks is putting Ireland in a dire situation of possible default.

With the recent scandal at Anglo Irish Bank concerning undisclosed loans the fear is rising that the Irish Government will be hit with much more ‘yet to be disclosed’ losses and will push Ireland over the edge into default.

Ireland is set to borrow an additional €15 Billion ($19.3 Billion US) this year and Ireland’s national debt will reach €70 Billion ($90 Billion US). A default by Ireland would have wide sweeping implications for the EU Union. This comes on top of other nations believed to be on the brink of default, such as Ukraine and Russia and follows the disastrous financial failures in Iceland just a few months ago that toppled the Icelandic Government.