Moody’s Investors Service said it has no current plans to lower its top debt ratings on the US and the UK after a report this week stated the sovereigns may “test the Aaa boundaries.”
“The outlook is stable” for the two countries, Moody’s senior vice president Tom Byrne said in an interview in Singapore yesterday. Byrne was citing comments by Steven Hess, vice president and senior credit officer of the sovereign ratings group for the company, made in a teleconference yesterday.
The pound rose the most in a week against the yen and the dollar after Dow Jones reported that Moody’s has no plans to revise the ratings for the US and the UK The British currency gained 0.7 percent to ¥144.56, and advanced 0.1 percent to US$1.6292.
Bonds from Dubai to Greece have tumbled in the past two weeks on concerns that some governments and companies will struggle to patch up their finances after the worst global recession since World War II. Spain had the outlook on its debt grade lowered by Standard & Poor’s on Wednesday as its public finances worsen, one day after Greece’s government bonds tumbled following a downgrade by Fitch Ratings.
Moody’s analysts, in a report on Tuesday, said public finances in the US and the UK are worsening in the wake of the global financial crisis and the sovereigns may “test the Aaa boundaries.” It said the US and UK have “resilient” Aaa ratings, as opposed to the “resistant” top ratings of Canada, Germany and France.
“Their resiliency will be tested in the next couple of years but for now they have a high degree of ‘financeability’ and debt affordability,” Hess said in a presentation prepared for the teleconference yesterday. “The rise in debt and higher interest costs could test ratings under some scenarios but not right away.”
Moody’s defines “resilient” countries as “Aaa countries whose public finances are deteriorating considerably and may therefore test the Aaa boundaries, but which display, in our opinion, an adequate reaction capacity to rise to the challenging and rebound.”
Resistant countries are ones that started the crisis from a robust financial position and aren’t undergoing lasting changes to their economic models, Moody’s said.
The credit rating on Greece’s government bonds was cut to BBB+ from A- by Fitch Ratings on Tuesday. The company also downgraded five Greek banks the same day.
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