Nov 20 (Reuters) - The risk premium investors ask to hold Italian and Portuguese sovereign debt fell slightly on Monday, reflecting some relief, after rating agency Moody’s upgraded its view of the two countries.
Moody's on Friday left Italy's sovereign debt rating at Baa3 -- one notch above junk -- while upgrading the outlook from negative to stable. Most analysts expected no downgrade from Moody’s, with some forecasting a better outlook.
Separately, the rating agency upgraded Portugal's long-term issuer rating two notches to A3 from Baa2, despite the political crisis triggered by the resignation of the country's prime minister.
The gap between Italian and German 10-year yields -- a gauge of how risky investors perceive Italian debt to be -- fell to a fresh 2-month low at 171.4 basis points (bps). It was last at 172 bps. It dropped from about 185 bps on Monday last week to 172 bps late on Friday, its lowest level since Sept. 21.
The spread between Portuguese and German 10-year yields fell 2 bps to 58.7 bps.
(Reporting by Stefano Rebaudo, editing by Amanda Cooper)