Investors brace for Spanish debt downgrade

Investors expect Moody's to cut its Aaa credit rating on Spanish debt by up to two levels after a three-month review it announced in June ends tomorrow.

Five out of eight fund managers running an aggregate $700bn (£443n) surveyed by Bloomberg foresee a one-notch cut to Aa1. The others expect a two-level reduction to Aa2. Moody's has said Spain's economy will take years to recover from its malaise, and predicts GDP will expand by only 1% between 2010 and 2014. In July senior credit officer Steven Hess signaled Spain was likely to lose its rating. Both Fitch and Standard & Poor's have lower ratings for Spanish sovereign debt than Moody's rating Meanwhile, yields on Ireland's 10-year bonds hit a record 454bps above equivalent bunds...