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Greece at risk of S&P downgrade (Update)
Standard & Poor’s says decisions from upcoming EU summit will play role in ranking; spreads widen
Credit rating agency Standard & Poor’s (S&P) has warned that it could further downgrade both Greece and Portugal in the coming few weeks, depending on the outcome of a crucial European leaders’ summit later this month.
Greek 10-year bonds dropped after the news on Wednesday, pushing the yield two basis points higher to 12.07 percent, while stocks on the Athens bourse ended 0.63 percent lower.
S&P said in a report that it is maintaining its A- rating on Portugal and its BB+ rating on Greece, but has kept both countries on so-called “CreditWatch with negative implications.”
Greece accepted a bailout last year, as did Ireland, and ailing Portugal is widely expected to follow suit even though it managed to raise another 1 billion euros on Wednesday.
S&P said it could lower the ratings on both countries within the next two months after analyzing an expected new European bailout mechanism. EU policymakers are set to decide later this month on the key features of the European Stability Mechanism, which is due to replace the current European Financial Stability Facility from 2013.
It said it was unlikely that either rating would be cut by more than two notches.
Eurozone governments have said that private creditors may be included in future financial rescue packages. However, there is still a high degree of uncertainty about how and at what point private creditors might be forced to take losses.
Greece accepted a 110-billion-euro bailout from its partners in the EU and the International Monetary Fund last May, and has some breathing room before it needs to tap bond markets for more cash.
However, Greece needs to see its market borrowing costs fall if it is to tap investors for cash in the months and years to come - investors continue to demand a high premium to lend to it.
The yield on Greece’s 10-year bond spiked over 12 percent once again on Wednesday. That took the spread with benchmark German bunds to over 9 percent - a staggering difference for two countries that use the same currency.
ekathimerini.com , Wednesday March 2, 2011 (18:52)
Standard & Poor’s says decisions from upcoming EU summit will play role in ranking; spreads widen
Greek 10-year bonds dropped after the news on Wednesday, pushing the yield two basis points higher to 12.07 percent, while stocks on the Athens bourse ended 0.63 percent lower.
S&P said in a report that it is maintaining its A- rating on Portugal and its BB+ rating on Greece, but has kept both countries on so-called “CreditWatch with negative implications.”
Greece accepted a bailout last year, as did Ireland, and ailing Portugal is widely expected to follow suit even though it managed to raise another 1 billion euros on Wednesday.
S&P said it could lower the ratings on both countries within the next two months after analyzing an expected new European bailout mechanism. EU policymakers are set to decide later this month on the key features of the European Stability Mechanism, which is due to replace the current European Financial Stability Facility from 2013.
It said it was unlikely that either rating would be cut by more than two notches.
Eurozone governments have said that private creditors may be included in future financial rescue packages. However, there is still a high degree of uncertainty about how and at what point private creditors might be forced to take losses.
Greece accepted a 110-billion-euro bailout from its partners in the EU and the International Monetary Fund last May, and has some breathing room before it needs to tap bond markets for more cash.
However, Greece needs to see its market borrowing costs fall if it is to tap investors for cash in the months and years to come - investors continue to demand a high premium to lend to it.
The yield on Greece’s 10-year bond spiked over 12 percent once again on Wednesday. That took the spread with benchmark German bunds to over 9 percent - a staggering difference for two countries that use the same currency.
ekathimerini.com , Wednesday March 2, 2011 (18:52)
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