Determined to stay ahead of the competition, Fitch has cut Ireland’s sovereign debt rating one notch to A+, outlook negative. The three main agencies had almost all settled upon Fitch’s previous rating of AA-, with S&P’s recent cut removing its one notch difference, and Moody’s recent cut and downgrade review looking likely to cut its two notch difference. But Fitch has taken the next step, following the “greater than expected fiscal cost” of the Irish government’s bank recapitalisation plan.

Before you place too much emphasis on this, however, you might want to read a new paper from NBER. Research has found that increased competition among ratings agencies has led to lower quality corporate ratings. In one test, speculative grade firms were 7.7 times as likely to default within three years as investment grade firms when competition was low (i.e. Fitch market share is at the 25th percentile), but only 2.2 times as likely when competition was high (market share at the 75th percentile). Read more