by Calculated Risk on 9/20/2010 04:17:00 PM

The European bailout fund, called the European Financial Stability Facility (EFSF), received the expected AAA rating today.

From the NY Times: European Bailout Fund Gets Top Rating From Credit Agencies

The European Financial Stability Facility, as the fund is known, was rated AAA by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings. Standard & Poor’s said its understanding was that “guarantees from member governments supporting the repayment of E.F.S.F. obligations will be unconditional, irrevocable and timely, and thereby consistent with our criteria for sovereign guarantees.”

The ratings are preliminary because no member state has yet called on the facility for help, and it has thus issued no debt.

The facility will not be "pre-funded", but will only raise funds when a member state asks for help.

Key European analysts had expected that countries would wait until the rating was secured before asking for help. Now there is a focus on Ireland and Portugal - the two countries most likely to ask for help in the near term.

The yields for Ireland and Portugal 10 year bonds are now above the crisis levels back in May.

And from Bloomberg: Honohan Says Irish Government Must Cut Deficit at Faster Pace

The extra yield that investors demand to hold 10-year Irish bonds over German bunds today exceeded 400 basis points for the first time as the government struggles to convince investors it can cap the cost of bailing out its banking system. Portugal is also being punished by investors, with the spread on its bonds also touching a record today. That’s fueling concerns that both countries may have to follow Greece and ask the European Union and the International Monetary Fund for a rescue.

“We think there is a measurable risk that Ireland and Portugal will access the EFSF and IMF, but probably only early next year,” Goldman Sachs Group Inc. Chief European Economist Erik Nielsen said in a note yesterday.

And something else to watch from the WSJ: ECB Steps Up Its Bond Buys Amid Worries

The European Central Bank has increased its purchases of government bonds amid rising concerns in financial markets about the ability of Greece, Ireland and Portugal to repay their debts.
...
Bond buys by the ECB, though higher in recent weeks than during much of the summer, are still a fraction of what they were when the program started.