THE COST OF government borrowing went back on the rise today, on the news that credit ratings agency Moody’s is considering once again downgrading its credit rating for the Irish state.

With the agency saying it needed to revise its rating of AA1 on the back of the cost of recapitalising the country’s banks, the cost of 10-year bonds rose for the first time since the government announced the final cost of the bailout.

Having opened at 6.276%, their lowest opening value since September 16 and having gone only downward since last Thursday’s announcements, 10-year bonds closed at 6.382%, a relative increase of almost 1.7%.

Shorter-term bonds saw similar rises, with eight-year lending up to 5.911%, six-year yields at 5.438% (a relative increase of 2.5%), and four-year bonds up to 4.854%, a relative rise of 2.7%.

Two-year bonds shot up by 5% on their morning price, closing at 3.605%. The spread between Irish and German 10-year bonds lay at 4.1%.

If Moody’s does increase its rating, it would make it more difficult for the state to borrow at competitive rates and increase the probability that the government would need to access the EuroTARP financial stability fund.

Ireland has already pulled out of its scheduled auctions for October and November because of the current price of Irish debt, and because the government is currently planning its four-year financial strategy to be published next month,

That strategy is intended to bring Ireland’s budget deficit as a percentage of GDP back to within the European limit of 3% before 2014.

What do Moody’s ratings mean anyway? >