What does moody's junk status credit rating mean for Ireland

Sceala Philosopher Location: So Cal

I have searched around for the answers to this bad news for Ireland.
It seems to me that Moody's are making millions from Chinese whispers.
Stupid mistake, I meant Billions, Moody's are making Billions from Chinese whispers.
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Junk Bond status for Ireland
What Does It Mean?
What Does Junk Bond Mean?
A bond rated 'BB' or lower because of its high default risk.

Also known as a "high-yield bond" or "speculative bond".
A Junk Bond are usually purchased for speculative purposes. Junk bonds typically offer interest rates three to four percentage points higher than safer government issues.

The news reporting the junk rating for Ireland
Irish credit rating cut to junk status by Moody's
Euro on the brink: Ireland’s credit rating was downgraded to junk status last night by Moody’s Investors Services, one of three such agencies which dominate the global ratings industry. The move will almost certainly lead to a further sell-off of Irish Government bonds when the market opens this morning.
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Moody’s downgraded Ireland from “Baa3” to “Ba1”, which is a speculative grade rating, frequently described in market commentary as “junk”. Ireland retains its investment grade rating from the two other large ratings agencies.

Moody’s gave as its main reason for the downgrade the growing likelihood of the EU imposing losses on sovereign bondholders of weak countries.
Treasuries Gain as Moody’s Cuts Ireland Credit Rating to Junk
Treasuries rose as Moody’s Investors Service lowered Ireland’s credit rating to junk, fueling concern that the European sovereign-debt crisis will spread and dampen investors’ appetite for higher-risk assets.

NEW YORK (Dow Jones)--Worries about the euro zone's debt troubles were stirred again by the downgrade of Ireland's credit rating Tuesday, pushing up prices of safe-haven Treasury ...

Ireland Cut to Junk Rating by Moody’s
Ireland Loses Investment Grade
(Bloomberg) -- Domenico Lombardi, senior fellow at the Brookings Institution, and Charles Gushee, managing director at Auerbach Grayson & Co., talk about the European economy, Italy's credit rating and Ireland joining Portugal and Greece as the third euro-area nation to have its rating reduced to below investment grade. Gushee and Lombardi speak with Pimm Fox and Julie Hyman on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

Ireland joined Portugal and Greece as the third euro-area nation to have its credit rating reduced to below investment grade as European Union finance ministers struggle to contain the region’s sovereign debt crisis.

Moody’s Investors Service cut Ireland to Ba1 from Baa3, citing the probability that Ireland will need additional official financing and for investors to share in losses before it can return to the private market to borrow. The outlook remains “negative,” Moody’s said in a statement yesterday.

The euro fell to a four-month low against the dollar as European finance ministers failed to present a solution to the financial contagion that’s threatening to spread to Italy from Greece, Ireland and Portugal. In Spain, Finance Minister Elena Salgado said the nation might need to endure even deeper spending cuts in 2012 than those currently planned. Ireland, which had a top Aaa rating just over two years ago, has suffered after a real-estate boom collapsed, fueling bank bailouts and a surge in the country’s debt.

First off - Moodys credit rating agency - what is the deal with this company. Who regulates them?
Moodys are the same rating agency who gave the corrupt Anglo Irish bank the inflated ratings. It was those ratings that enabled the Anglo bankers to go and borrow the gambling Billions. It was that Anglo Irish bank (Moodys approved) that was the main factor in destroying what was (up until 2004) a manageable and successful economy.
Of course the Irish government is most to blame, they could have and should have brought in laws to stop the false economy. But Moodys geez.

The same Moody's that rated AAA the States sub prime mortgage disaster waiting to happen.

Seriously why the hell is anyone paying attention to this erratic finance business. And who are they!
Who are Moody's
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Moody's
From Wikipedia, the free encyclopedia
Type Public
Traded as NYSE: MCO
Founded New York City (1909)
Headquarters New York City
Revenue increase US$1.797 billion (2010)
Operating income increase US$687.5 million (2010)
Net income increase US$407.1 million (2010)
Website moodys.com

Moody's Corporation (NYSE: MCO) is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized ratings scale. It is one of the big three credit rating agencies and has a 40% share of the world market, as does its main rival, Standard & Poor's;[1] Fitch Ratings has a smaller share.[2]

Moody's was founded in 1909 by John Moody. Top institutional owners of Moody's include Berkshire Hathaway and Davis Selected Advisers.

History of Moody's credit rating agency
Moody's was founded in 1909 by John Moody, beginning with Analyses of Railroad Investments, "a book about railroad securities, using letter grades to assess their risk."[1] Moody's Investors Service was incorporated on July 1, 1914, and soon extended coverage to US municipal bonds. By 1924, Moody's ratings covered nearly 100 percent of the US bond market.[3]

In the 1970s, Moody's expanded into commercial debt, and also began the practice, along with other ratings agencies, of charging bond issuers for ratings as well as charging investors.[3]

The number of countries covered by Moody's has risen from 3 in 1975, to 33 in 1990, to over 100 by 2000.[4] Announcements by Moody's of possible or actual downgrades of a country's bond rating can have a major political and economic impact, as for example in Canada in 1995.[4]

Criticism of Moody's credit rating agency
Credit rating agencies such as Moody's have been subject to criticism in the wake of large losses in the asset-backed security collateralized debt obligation (ABS CDO) market that occurred despite being assigned top ratings by the credit rating agencies. For instance, losses on $340.7 million worth of ABS collateralized debt obligations (CDO) issued by Credit Suisse Group added up to about $125 million, despite being rated Aaa by Moody's.[5]
See also: Credit rating agency#Criticism
Power and influence

Moody's has been accused of "blackmail". In one example the German insurer Hannover Re was offered a "free rating" by Moody's. The insurer refused. Moody's continued with the "free ratings", but over time lowered its rating of the company. Still refusing Moody's services, Moody's lowered Hannover's debt to junk, and the company in a few hours lost $175 million in market value.[6]

"As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression. A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings."[7]

Moody's Moody's credit rating agency the ratings system
Includes the differences with Standard and Poor's ratings.
Long-term obligation ratings
What does moody's junk status credit rating mean for Ireland
Investment grade

Aaa: Moody judges obligations rated Aaa to be the highest quality,[8] with the "smallest degree of risk".[9]
Aa (Aa1, Aa2, Aa3): Moody judges obligations rated Aa to be high quality, with "very low credit risk",[8] but "their susceptibility to long-term risks appears somewhat greater".[9] (AA+, AA and AA- in S&P)
A (A1, A2, A3): Moody judges obligations rated A as "upper-medium grade", subject to "low credit risk",[8] but that have elements "present that suggest a susceptibility to impairment over the long term".[9] (A+, A and A- in S&P)
Baa1, Baa2, Baa3: Moody judges obligations rated Baa to be "moderate credit risk".[8] They are considered medium-grade and as such "protective elements may be lacking or may be characteristically unreliable".[9]

Speculative grade (also known as "High Yield" or "Junk")

Ba1, Ba2, Ba3: Moody judges obligations rated Ba to have "questionable credit quality."[9]
B1, B2, B3: Moody judges obligations rated B as speculative and "subject to high credit risk",[8] and have "generally poor credit quality."[9]
Caa1, Caa2, Caa3: Moody judges obligations rated Caa as of "poor standing and are subject to very high credit risk",[8] and have "extremely poor credit quality. Such banks may be in default..."[9]
Ca: Moody judges obligations rated Ca as "highly speculative"[8] and are "usually in default on their deposit obligations".[9]
C: Moody judges obligations rated C as "the lowest rated class of bonds and are typically in default,"[8] and "potential recovery values are low".[9]

Special

WR: Withdrawn Rating[10]
NR: Not Rated[10]
P: Provisional

Short-term taxable ratings

P-1 Moody judges Prime-1 rated issuers as having "a superior ability to repay short-term debt obligations".[11]
P-2: Moody judges Prime-2 issuers as having "a strong ability to repay short-term debt obligations".[11]
P-3: Moody judges Prime-3 rated issuers as having "an acceptable ability to repay short-term obligations".[11]
NP: Moody considers "Not Prime" rated issuers as not falling "within any of the Prime rating categories".[11]

Moody notes that "Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced by the senior-most long-term rating of the issuer, its guarantor or support-provider."[11]
Short-term tax-exempt ratings

Unlike S&P, Moody's has separate categories for short term municipal bonds. The ratings categories largely overlap, though, and have the same implications for the ability to repay short-term obligations.
Individual bank ratings

Moody's also rates each bank's financial strength.[9] These ratings differ from deposit ratings in that they measure how likely the bank is to need assistance from third parties.

A: "superior intrinsic financial strength"[12]
B: "strong intrinsic financial strength"[12]
C: "adequate intrinsic financial strength"[12]
D: :"modest intrinsic financial strength, potentially requiring some outside support at times"[9][12]
E: "very modest intrinsic financial strength, with a higher likelihood of periodic outside support"[9][12]

Executive officers

Raymond W. McDaniel Jr. - Chairman and Chief Executive Officer
Linda S. Huber - Executive Vice President and Chief Financial Officer [13]

See also

Moody's AAA Bond
Moody's Analytics
A. M. Best
Dominion Bond Rating Service
Nationally Recognized Statistical Rating Organizations
Reuters
Bloomberg L.P.
Morningstar, Inc.
Standard & Poor's

References
^ a b Alec Klein, Washington Post, November 23, 2004, Smoothing the Way for Debt Markets: Firms' Influence Has Grown Along With World's Reliance on Bonds
^ juneauempire.com/stories/050509/opi_436594375.shtml
^ a b Moody's History
^ a b Alec Klein, Washington Post, November 23, 2004, Credit Raters Exert International Influence
^ Tomlinson, Richard; Evans, David (2007-05-31). "CDO Boom Masks Subprime Losses, Abetted by S&P, Moody's, Fitch". Bloomberg
^ "Credit Raters' Power Leads to Abuses, Some Borrowers Say" byAlec Klein, Washington Post, November 24, 2004, [1]
^ "How Moody's sold its ratings - and sold out investors", by Kevin G. Hall, McClatchy Newspapers, October 18, 2009, [2]
^ a b c d e f g h "Moody's Rating Symbols & Definitions" (PDF). p. 8. Retrieved 2009-09-21.
^ a b c d e f g h i j k l Moodys. Rating Definitions Requires free registration. Retrieved 2008-10-06
^ a b "Moody's Rating Symbols & Definitions" (PDF). p. 5. Retrieved 2009-09-21. "Withdrawn - WR ... Not Rated - NR"
^ a b c d e "Moody's Rating Symbols & Definitions" (PDF). p. 10. Retrieved 2009-09-21.
^ a b c d e "Moody's Rating Symbols & Definitions //" (PDF). p. 25. Retrieved 2009-09-21.
^ Officers and Directors from Moody's Website
What does moody's junk status credit rating mean for Ireland
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RTE on the Moody's downgrade
Moody's cuts Ireland rating to junk status
Credit agency Moody's has downgraded Ireland's debt rating to junk status and warned of the growing possibility of a second bailout.
Credit agency Moody's has tonight downgraded Ireland's debt rating to the junk status of Ba1.
Moody's said it reduced the rating by one notch because there was a 'growing likelihood' that Ireland will need more bailout aid in late 2013 when the current bailout ends.

The Department of Finance has criticised the 'disappointing development' saying Ireland had done all it can can 'to put our house in order'.

The agency warned of further downgrades as the economy struggles to pull out of the financial crisis.
Last week, Moody's lowered Portugal's debt rating to junk status, sparking fierce criticism from EU leaders and calls for a ban on rating agency decisions for countries under internationally-approved rescue packages.
'The main driver of today's downgrade is the growing likelihood that participation of existing investors may be required as a pre-condition for any future rounds of official financing, should Ireland be unable to borrow at sustainable rates in the capital markets after the end of the current EU/IMF support programme at year-end 2013.'

However, a Department of Finance spokesperson was highly critical of the downgrade.
'It is important to point out that Ireland's rating with all of the other major agencies - Standard & Poors, Fitch and DBRS - remains within the investment grade band,' the spokeperson said.
'This is a disappointing development and it is completely at odds with the recent views of other rating agencies. Just last week, Fitch & DBRS noted our economy's return to growth in the first quarter, the progress in reducing our budget deficit and said that there was no reason to alter their views on Ireland at this time.
'Given the timing of the Moodys announcement it is difficult to see how their decision reflects the agreement reached at last night's Eurogroup meeting to enhance the flexibility and the scope of the EFSF, and to lengthen the maturities of, and lower the interest rates on, loans to countries in receipt of financial support.
'The Irish economy is on track to return to positive growth this year. GDP expanded by 1.3% in the first quarter, which is encouraging.
'We have met all the quantitative fiscal targets set so far under the EU/IMF Programme, most recently for end-June, and on foot of a EUR6 billion consolidation effort, are on track to achieve the deficit reduction target for the year as a whole.
'We are continuing with the process of restoring our domestic financial system to health so it can contribute to our economic recovery. Recapitalising the domestic banks by end July, with a not insignificant contribution from the private sector, will represent a key milestone.
'As part of our institutional fiscal reform commitments, we have recently established the Irish Fiscal Advisory Council.
'We are doing all that we can to put our house in order and the progress that we are making is there for all to see.'

In a statement, the NTMA said Ireland was delivering on the terms of the bailout.
'The situation in the euro area is evolving rapidly,' it said.
'In their statement of Monday 11 July, the Eurogroup set out a range of measures to safeguard the euro area's financial stability.
'These include enhancing the flexibility and the scope of the European Financial Stability Facility, lengthening the maturities of the loans and lowering the interest rates. These are positive developments for Ireland.'
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Buzek defends corporation tax rate
Earlier, President of the European Parliament Jerzy Buzek said the European Union should not be putting pressure on Ireland to change its corporation tax rate.
On the second day of his official visit, Mr Buzek said the majority of his colleagues in the European Parliament supported a cut in the interest rate on Ireland's bailout loan.
He said Ireland's EU/IMF bailout interest rate should probably be 1% less, but he said this depends on the agreement of all the relevant agencies.
Mr Buzek also said that 'tremendous goodwill' remained towards Ireland in the European Union.
Addressing the Seanad this afternoon, he said the EU should not be putting pressure on Ireland to change its corporation tax rate.
He said Ireland will get out of its difficulties and that addressing competitiveness was the key to achieving that.
The head of the European Parliament said Europe as a whole needed to stimulate growth and that gaps in the internal market needed to be closed.
He insisted that there was no crisis in the eurozone, just problems affecting some members of the euro.
What does moody's junk status credit rating mean for Ireland

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What does moody's junk status credit rating mean for Ireland