Moody's downgrades Argentina to Caa1

Moody's Investors Service said it downgraded Argentina's government bond rating to Caa1 from B3 and changed the outlook to stable from negative.

Concurrently, the agency downgraded its rating on Argentina's foreign legislation debt to provisional Caa2 from provisional Caa1.

Moody's said its decision to downgrade Argentina's government bond rating was driven by a significant fall in official reserves, which dropped to $27.5 billion from a high of $52.7 billion in 2011, thereby increasing the risk that Argentina may not meet its foreign-currency debt service obligations,

It was also driven by an inconsistent policy environment that increases the likelihood that official reserves will remain under pressure this year and next, the agency said.

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