Irish bonds gain ahead of Moody’s rating review

The Irish bonds strengthened on Friday as investors were cautious ahead of Moody’s ratings review that may end with an upgrade for Europe's fastest growing economy. The yield on the benchmark 10-year bonds fell 3bps to 0.836 pct and the yield on 2-year bonds dipped 1bps to -0.338 pct by 1055 GMT.

The ratings were in focus with Moody's expected to report on Ireland and Standard & Poor's scheduled to give an update on Italy later in the day. There is likelihood that Moody's could upgrade Ireland's Baa1 rating, which has a positive outlook. A fall in the debt-to-GDP ratio, a commitment to improving Ireland's fiscal position and progress in strengthening the banking sector all bode well for a ratings upgrade. The Irish economy grew by 7.8 percent last year, making it the fastest growing economy in the European Union for a second straight year.

"A stronger economy is helping bring down Ireland's debt-to-GDP ratio at a fast pace and the new government, while in a minority, remains committed to fiscal consolidation," said Lyn Graham-Taylor, a fixed income strategist at Rabobank to Reuters.

Also, rising worries about the up-coming June referendum shifted investors towards safe-haven assets as Britain is one of Ireland's biggest trading partners and a vote to leave the European Union is a risk for the Irish economy. According to latest British Chambers of Commerce's (BCC) survey, conducted last month concluded that there is growing support amongst its members for a ‘Brexit’. They mentioned that its members to vote for Brexit increased to 37 pct, from 30 pct in the late January survey. Similarly, members in favour to stay in European Union fell to 54 pct, from 60 pct in the previous survey.

Meanwhile, the Irish Stock Exchange Overall Index (ISEQ) fell 0.81 pct to 6,091.86 by 1055 GMT.