NEW YORK, April 1 (Reuters) - Moody's Investors Service on Wednesday cut its ratings on J.C. Penney Co (JCP.N: Quote, Profile, Research) into junk territory, citing an expectation that the retailer's operating results will continue to decline in fiscal 2009.

Moody's cut J.C. Penney's senior unsecured debt one notch to Ba1, one step below investment grade, from Baa3. A downgrade into junk territory can significantly increase a company's borrowing costs.

"J.C. Penney's operating results will continue to decline in fiscal 2009 and are likely to remain below their historical levels over the near to medium term," Moody's said in a statement.

"This likely decline in results will lead to J.C. Penny's credit metrics falling to levels that are more appropriate for a mid Ba rating," Moody's added.

The outlook on the rating is stable, indicating an additional rating change is not expected over the next 12-to-18 months.

"The rating is supported by J.C. Penney's very good liquidity and history of balanced financial policies. Moody's believes that these two items will allow J.C. Penney to weather the current weak consumer spending environment -- albeit while maintaining weaker than historical credit metric," Moody's said. (Reporting by Karen Brettell; Editing by Theodore d'Afflisio)