Spain’s credit rating was raised to Baa2 at Moody’s Investors Service, which cited a rebalancing of the economy toward more sustainable growth and progress made in implementing structural reforms.
The outlook for the rating is positive, Moody’s wrote in a statement. The one level increase was from Baa3, which is one step above junk.
Borrowing costs in peripheral European nations have fallen after Ireland and Spain exited their rescue programs. Spain sold 10-year bonds last week at the lowest yield since 2006, when the country was growing at an annual rate of 4 percent and the public debt burden, at 40 percent, was less than half the current level.
Moody’s cited structural improvements in the country’s external competitiveness and the deleveraging in the domestic economy. Progress made in implementing structural reforms in the labor market, the public pension system, structural fiscal measures and changes to the fiscal framework for the country’s regional governments were also credited for the increase.
Investors routinely ignore ratings companies’ decisions. In almost half the instances, yields on government bonds fall when a rating action by Moody’s and rival Standard & Poor’s suggests they should climb, according to data compiled by Bloomberg on 314 upgrades, downgrades and outlook changes going back as far as the 1970s. When S&P downgraded the U.S. government in August 2011, bonds rose and pushed Treasury yields down to records.
Spain’s economy emerged from a two-year recession in the third quarter and the government forecasts growth of 0.7 percent this year. Foreign investors are snapping up bonds and shares, spurring a 20 percent increase in the nation’s main share index in the past six months. Still, unemployment remains the second- highest in the European Union at 26 percent.
© Copyright 2025 Bloomberg News. All rights reserved.