Moody’s lowers Portuguese sovereign debt rating to junk status

6 July 2011

Lisbon, Portugal, 6 July – Credit rating agency Moody’s has lowered its rating on Portugal’s sovereign debt by four notches from “Baa1” to “Ba2” with a negative outlook, indicating that further downgrades could be on the cards.

With this four-notch downgrade Moody’s has relegated Portugal’s sovereign debt to junk bond status.

Moody’s said its decision was based on three reasons, specifically that there was a growing concern that Portugal would need a second bailout package, that the country would not be able to meet its target of reducing its deficit and that the Portuguese state would not be able to finance itself on the market at sustainable rates as of the second half of 2013.

The other financial debt rating agencies, Standard & Poor’s and Fitch Ratings, currently rate Portugal’s debt at “BBB-“, just one notch above the lower limit for investment grade bonds.

Moody’s also lowered its rating on Portugal’s short term debt to “not prime”.

Following Moody’s decision Portugal became the Euro Zone country with the second lowest rating, after Greece, whose sovereign bonds are rated by the agency at “Caa1” or five notches below Portugal’s debt. (macauhub)