NEW YORK, Oct. 16 (Xinhua) -- Moody's Investors Service Tuesday confirmed the Baa3 rating of Spain's government bond while maintaining its negative outlook.
In its latest statement, Moody's said the decision to confirm Spain's sovereign rating at the"investment-grade" reflected the positive developments in the debt-ridden country, as well as in the euro zone since June.
Moody's believed that the combination of euro area and the European Central Bank support and the Spanish government's own efforts should allow the government to maintain capital market access at reasonable rates, providing it with the time it needs to stabilize public debt over the next few years.
However, the rating agency maintained its negative outlook for the country as the risks to its baseline scenario are "high and skewed to the downside."
Moody's warned that the agency would downgrade Spain's rating, potentially of multiple notches, if its current expectations regarding euro area and ECB support were to fail to materialize, or if the Spanish government failed to implement the necessary fiscal and other reform measures.
At the same time, in view of the currently negative outlook on Spain's sovereign rating, no upward rating movement is likely over the short term, according to the agency. However, Moody's would consider returning the outlook on Spain's rating to stable if the pace and strength of the country's economic recovery were to exceed Moody's current expectations.
Moody's action came after the Standard & Poor's last week cut Spain's long-term rating to one notch above junk last week.
There had been speculation in financial markets that Moody's would cut Spain's rating to "junk" level, which may result in disastrous consequences for the government's debt-servicing costs and the ratings of Spanish companies.