It is rather a surprise that Moody’s, which was the most pessimistic rating agency on Ireland’s ability to repay its debts during the financial crisis, decided on Friday to revise upwards its view of the creditworthiness of the state.

The global economy and financial markets have, after all, worsened since peers Moody’s, Fitch and DBRS Morningstar upgraded their views on the Irish sovereign in January.

The market interest rate, or yield, on Irish 10-year bonds rose from 0.47% to 1.81% over the same period, to levels last seen in late 2014, months before the European Central Bank (ECB) injected its money. – printing presses with multi-billion euro bond purchase programs.

The yield differential – or spread – between benchmark Irish bonds and similar German bonds has widened from 0.5 percentage points to over 0.67 points since the end of January. It may be much narrower than the two percentage point spread that has developed between German and Italian 10-year bonds, but as the ECB winds down its quantitative easing stimulus programs and preparing to raise rates later this year to rein in runaway inflation, markets are again looking at individual eurozone sovereigns. And old cracks begin to reappear.

While Moody’s, which downgraded Ireland’s credit rating to outright quality in July 2011, was pleased to upgrade Ireland on Friday – following the improved economic resilience of the State thanks to Brexit, the Covid-19 pandemic and the unrest caused so far by the Ukraine war – it remains slightly more cautious than its peers. Its one-notch upgrade to the Republic’s rating, A1, remains one level below those of Fitch, DBRS and Standards & Poor’s.

But just as financial markets had already moved past the worst prices and bond yields had begun to fall before Moody’s pulled out its red pen in 2011, investors paid little attention to its upgrade late Friday.

They were far more concerned about comments by hawkish ECB policymaker Robert Holzmann, Austrian central bank governor, on Saturday that the ECB should raise interest rates three times this year to combat soaring inflation.

It pushed eurozone bond yields higher across the board on Monday, with the Irish 10-year rising nearly 0.1 percentage point on the day.