Spain’s credit rating took another hit Wednesday, as ratings agency Moody’s downgraded the beleaguered nation’s sovereign debt three notches from A3 to Baa3, leaving it just one grade above “junk status.”
Moody’s said the downgrade was due to the recent Eurozone euro$100 billion loan offer to Spain, an effort to prop up its failing banking sector that the ratings agency believes will add considerably to the nation’s debt burden.
In early trading Thursday, the interest rate- or yield – on the country’s benchmark 10-year bonds rose to a record 7.017 percent, its highest level since Spain joined the euro in 1999.
“The crisis is deteriorating at an ever-increasing pace,” said Mark Schofield, a senior strategist at Citigroup. “Investors are increasingly pricing in either of the two tail risks – full eurozone break-up or fiscal union.”
Spain’s credit downgrade, combined with the upcoming Greek election – and the nation’s possible exit from the Eurozone, has world markets reeling.