2010.09.2807:21:00UTC+00Spanish Debt 'Could Be Downgraded'

International ratings agency Moody's may be about to downgrade Spain's Aaa credit rating in the next few days, media reports speculated on Tuesday.

Moody's had put Spain's rating under review in July in light of the country's bloated budget deficit and its weak economic performance. The agency said at the time that it would make a decision with regards to Spain's credit rating within three months, and the deadline is due to expire this week.

The Spanish Treasury on Tuesday successfully raised 3 billion euros selling 3-month and 6-month Treasury bills in an auction. The yield for the 3-month bills rose to 0.708% and that on the 6-month bills climbed to 1.218%.

Meanwhile, Standard & Poor's warned the Irish Republic may have to shell out more than the previously estimated 35 billion euros to rescue troubled lender Anglo Irish Bank.

"Estimates which were previously strongly against our 35 billion now seem to be becoming more in line with that level of recapitalization cost," S&P analyst Trevor Cullinan told state radio RTE. "The government's plan B with Anglo means that this 35 billion could even be exceeded.

"If that were to be the case, then potentially there would be further downward rating actions."

The warning sent Irish credit default spreads sprialling to a new euro lifetime high, reports said.

The Irish government is due to divulge details on its bailout of Anglo Irish Bank on Friday.

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