Ireland in line for possible upgrade from Fitch

Analysts expecting Fitch to raise Ireland rating to A from A- later today

Irish and Finnish yields fell on Friday as euro zone bonds rallied, with both countries waiting for credit rating reviews that could affect investor demand for their debt.

Moody’s was expected to remove Finland’s top AAA rank and Fitch to raise Ireland to A from A-.

“Both these reviews could have an impact on investors who base their investment decisions on ratings,” Commerzbank strategist Rainer Guntermann said.

Finnish 10-year yields were 3 basis points lower at 0.54 per cent on Friday. The gap between their yields and the German equivalent has already spread this year to its widest since Europe’s 2012 debt crisis.

Stuck in recession for four years, Finland’s own finance minister has called it “the sick man of Europe”. The country has been rocked by the decline of Nokia, once its leading company, and sanctions imposed on Russia, one of its main export markets, and it now faces an anti-austerity uprising.

A downgrade by Moody’s on Friday would knock its debt out of some triple-A bond indexes and force investors to sell the bonds .

By contrast, an upgrade for Ireland may help counter a move by some investors to sell Irish debt before elections later this month and a British referendum that could lead Britain, one of its biggest trading partners, to leave the European Union .

An upgrade to ‘A’ would raise the average rating assigned by the three main ratings agencies – Fitch, Standard and Poor’s and Moody’s- one notch.

That would not be as important as Moody’s raising Ireland to A territory from Baa1, something that has been long expected. But strategists said it would create higher demand from investors.

Irish 10-year yields were 2 bps lower at 0.98 per cent on Friday. Yields had risen away from its peers Belgian and French equivalents in recent weeks on worries around the elections due on February 26th.

Later on Friday, the United States will publish its non-farm payrolls report, a closely followed economic release. Its importance has grown as doubts have arisen that the Federal Reserve will keep raising interest rates in the face of an emerging market rout and slumping oil prices.

Economists polled by Reuters expect the US created 190,000 new jobs in January, down from 292,000 in December.

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