Breaking News - S&P downgrades Russia's sovereign credit rating to below investment grade

Ratings agency S&P said on Monday it had cut Russia's sovereign credit rating to BB+ or below investment grade with a negative outlook, and said Russia's economic growth prospects have weakened.

The ruble fell after the news to 67.63 against the dollar RUBUTSTN=MCX, or 5 percent lower than the previous close on the Moscow Exchange.

S&P had warned in late December that it could deprive Russia of its investment-grade credit rating as soon as mid-January, following a rapid deterioration of the country's monetary flexibility and a weakening economy.

S&P said in a statement that external and fiscal buffers were likely to deteriorate due to rising external pressure and increased government support to the Russian economy.

The downgrade, from BBB- to BB+, marks the first time in more than 10 years that Russian sovereign debt has been rated below investment grade, in what some call 'junk' territory.

It could not only harm Russia's image among investors, but also push up its borrowing costs, as many mainstream investment and pension funds have rules preventing them from buying anything not classed as investment grade.

Russia's economy is expected to slide into recession this year, as Western sanctions over Ukraine spur capital flight and inflation, and an enduring slump in oil prices sharply depresses Russia's export revenues.