After much posturing, Fitch has finally downgraded Ireland from AA- to A+, with a negative outlook. Net result: bund spread blows out to 415, up 5bps on the day, and will likely continue blowing out. We expect the FinMin to hold another conference call with Citi to reassure everyone how nothing is fucked here, which this time will be recorded by everyone in anticipation of another "mute button malfunction." Elsewhere Irish consumer confidence has plunged from 61.4 to 52.4. The two are speculated to be related.
Fitch Ratings downgraded Ireland's credit rating to A+ from AA- and put it on a negative outlook, pointing to the bigger-than-expected cost of cleaning up the country's banks and uncertainty over economic recovery.
"The downgrade of Ireland reflects the exceptional and greater-than-expected fiscal cost associated with the government's recapitalization of the Irish banks, especially Anglo Irish Bank," Fitch said in a statement on Wednesday.
"The negative outlook reflects the uncertainty regarding the timing and strength of economic recovery and medium-term fiscal consolidation effort."