Greece’s Credit Ratings Continue to Plummet

September 1, 2011 by · Leave a Comment
Filed under: International 

Moody’s has downgraded Greece’s sovereign debt by three notches and Standard & Poor’s has warned that Greece could again be downgraded if the outcome of an upcoming European leaders’ summit to determine the key features of the European Stability Mechanism – which is due to replace the current European Financial Stability Facility, doesn’t instill confidence.

Currently Moody’s has Greece rated B1 and “highly speculative” and Standard & Poor’s has the country rated BB+. It is unlikely that another downgrade by Standard & Poor’s would be more than two notches. However, should this be the case it would have little additional negative impact since Greece’s debt is already junk status.

A 110 billion euro bailout from its partners in the EU and the International Monetary Fund has given Greece some flexibility before again it needs to tap bond markets for more cash. And Greece needs to see its borrowing costs fall before they can again turn to the investment community.

Yield on Greece’s ten-year bond spiked to over twelve percent and took the spread with benchmark German bunds to over nine points. There is uncertainty about how and at what point private creditors might be forced to take losses on Greece’s debt.

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