By Marius Zaharia
LONDON Jan 13 New rules designed to cast light on the workings of credit agencies in Europe caused confusion on financial markets on Monday when Moody's Investor Services kept silent on whether it had taken action on Portugal.
Many traders had expected a decision from the agency on Portugal on Friday under regulations that came into force this year, and which the European Union said were intended to make ratings actions more transparent.
Moody's said on Monday in response to questions that it was not obliged to release a statement if it took no rating action on a sovereign issuer.
The new EU rules require Moody's and other credit agencies that operate in Europe, notably Standard and Poor's and Fitch, to lay out the dates on which they review a country's rating.
The calendar listed Jan. 10 as the date on which Moody's would review Portugal. After the bailed-out euro zone country sold 3.25 billion euros of bonds the previous day, the review was among the week's most anticipated events. Traders said some investors had bought Portuguese bonds in expectation of a positive rating decision.
However, by Monday morning there had been no announcement. In the first hours of trading, it was not clear whether Moody's had done anything or not, traders said.
Moody's later said in an email to Reuters that no statement meant no action had been taken and Portugal's Ba3 rating would next be reviewed on May 9.
"We are not obliged to release anything, to either change the rating or the outlook or affirm the rating on those days," Moody's said. "We are constantly monitoring the situation and if a ratings action is to take place then it would be published on those dates but we are not obliged to release anything."
On Friday, in line with the calendar, S&P affirmed Germany's triple-A ratings with a stable outlook, communicating a decision similar to that taken by Moody's on Portugal.
On the same day Fitch also affirmed the ratings of the European Financial Stability Facility - the euro zone's bailout fund - in line with its published calendar.
Fitch's and S&P's actions reinforced expectations Moody's would do the same.
"Our understanding was that ratings agencies would announce something," said Rainer Guntermann, a strategist at Commerzbank in Frankfurt. "I guess it's a new regulation and we all have to get familiar with the process."
An S&P review of Portugal, a Moody's review of Ireland and a Fitch review on the Netherlands, all scheduled for this coming Friday were still getting the market "excited," he said.
"Netherlands has a negative outlook and we expect it to be confirmed, Portugal is on credit watch negative and that actually does require some action and there could be a chance of an upgrade. On Ireland, it is just a matter of time before rating agencies start lifting its ratings," Guntermann said.
Richard McGuire, a senior interest rate strategist at Rabobank in London, said Moody's decision, although surprising, would not pose any problems to investors from now on as any statement would, in any case, be delivered after the market close.
He said, however, that this could have been a way to protest against EU efforts to have more control over the actions of rating agencies. Some euro zone politicians have blamed those firms for deepening the region's debt crisis with downgrades after they had been perceived as having failed to predict the global financial crisis in the first place.
"If you're a conspiracy theorist it almost seems to be like a silent protest," McGuire said.
Portuguese 10-year yields fell 2 basis points to 5.38 percent on Monday, with analysts saying markets continued to expect positive reviews from rating agencies in the near future.