14 Jul 2012

Moody's downgrades Italy's credit rating

10:50 am on 14 July 2012

A major rating agency has downgraded Italy's government bond rating by two notches leaving it just above junk.

Moody's now rates Italy's debt to Baa2 and the agency warned on Friday it could cut it further.

Despite the downgrade, solid domestic demand helped the Italian Treasury sell the top planned amount of €5.25 billion in bonds, paying less than a month ago on three-year paper, Reuters reports.

The ratings cut leaves Moody's ratings for Italy below those of the two other major agencies, Standard & Poor's and Fitch.

Moody's blamed increased liquidity risks for the country amid persistent euro zone woes and an expected deterioration of Italy's already weak economic condition as the main reasons behind its decision.