MOODY’S last night maintained its Baa3 rating on Spanish sovereign debt, one notch above junk, though it moved to a negative outlook.
Moody’s said Spain should have access to the capital markets at reasonable rates while it turns around its economy, thanks to “the combination of euro area and ECB support and the Spanish government’s efforts”.
The good news helped nudge the euro 0.3 per cent higher against the dollar.
It came after Spain sold more short-term debt than planned at slightly lower rates than a month ago, attracting investors who traded on expectations that a sovereign aid request could be near.
The country’s treasury yesterday sold €4.9bn of 12- and 18-month debt, beating the targeted upper range of €4.5bn and with the yield on the longer paper dipping from September’s auction to just above three per cent.
Rising expectations that Spain will soon ask for a Eurozone credit line to help cut its borrowing costs look set to dominate a EU summit beginning tomorrow, potentially crowding out talks on a disputed banking union.
The EU’s two-day summit, the fourth among the 27 leaders this year, was meant to focus on efforts to establish a single supervisor for the Eurozone’s banks, as well as longer-term plans for closer integration of the bloc.
There is even a narrow chance of a separate summit of the 17 Eurozone leaders after the main meeting to discuss the most pressing issues affecting the currency bloc, including Greece, Cyprus, Italy and Spain, officials said.
German finance minister Wolfgang Schaeuble also threw his weight into the mix ahead of the summit, saying it was time for a leap forward in European integration and that ideas such as a super-empowered commissioner for budgets needed serious consideration.
Schaeuble said he had run his ideas past Chancellor Angela Merkel and while she was “somewhat more cautious”, there was a need to take bold action to quell the debt crisis.