Ireland rating down, CDS up, Jameson still happy, John (Corrigan) is not

The Standard & Poor’s credit rating agency downgraded Ireland’s credit rating one notch to from AA to AA- overnight as fears mount about the impact on public finances for supporting/bailing out the Irish banks.

Ireland began its descent down the ratings scale in March 2009 when it lost its AAA-rating so today may not be as big a surprise for some. WSJ reports the early morning market in Ireland CDS are up 12 bps at 310/320 (bid/ask). BusinessWeek reports that Irish 10-year government bonds are yielding 6 bps more than yesterday at 5.314%, or 321 bps over German bunds while also noting that Ireland’s debt is now riskier than Iceland’s debt.

All limericks aside, the long-term impact of the ratings downgrade (and their implicit burden on Irish citizens as borrowing costs rise) is no laughing (or poetic) matter (until after the alcohol starts flowing – then it solves all life’s problems). Perhaps the Irish will realize that is is not worth fighting about whether Jameson is Catholic and Bushmills is Protestant and instead focus on how good the country’s best export (Irish whiskey – irrespective of religion) really is and why the world should be drinking more Irish whiskey instead of the (unreligious) American whiskey (bourbon) or Scotch. The ~$750 million in worldwide American exports of Jack Daniels, Jim Beam and Maker’s Mark last year would go a long way to supplying the future funds needed to bail out banks and probably prevent a downgrade. Instead, boozers may just end up spending more on taxes for their single-malts to feel good about their sovereign state regardless of what some credit analyst in a suit in New York thinks. Anyone know how many shots John Corrigan, Director of the National Treasury Management Agency (NTMA) in Ireland, had before stating today that the analysis used to make the decision to downgrade Ireland was flawed. Could it be even more than when he said in April that “If there were more turbulences, we could weather the storm very, very easily.”

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