Standard and Poor's lowered its long- and short-term sovereign credit ratings for Bahrain over concerns that the political unrest and demonstrations of the past week will persist.

The rating agency set Bahrain's ratings to A-/A-2 from A/A-1 and placed them on CreditWatch with negative implications.

Bahrain demonstrators thronged back on Monday into a central square that was the scene of violence last week.

S&P also lowered the ratings on the Central Bank of Bahrain and Bahrain Mumtalakat Holding, the sovereign wealth fund, to A-/A-2 from A/A-1 and also placed them on CreditWatch negative.

The Transfer and Convertibility Assessment on Bahrain was also changed to A from AA-. "The rating actions reflect our reappraisal of political risks in Bahrain," S&P said in a statement.

"We expect the demonstrations will persist, despite the government's use of force to clear the protesters from central Manama."

S&P said it aims to resolve the CreditWatch listing within the next three months, when the course of political events is clearer.

Debt insurance costs for Middle Eastern sovereigns continued to rise, with Bahrain's five-year credit default swaps 8 basis points higher at a new 18-month high of 305 bps. Dubai rose 9 bps to 440 bps while Israel also inched higher to a new 19-month high.

King Hamad bin Isa al-Khalifa has asked his son, the Crown Prince, to conduct a dialogue with all parties.

"We expect discussions on political reforms to be more protracted than those focused on improving the social safety net," the ratings agency said.-Reuters