The reaction of the bond market to the upgrading of the country’s credit rating to investment grade by the rating agency Standard & Poors (BBB-/A-3 from BB+/B with stable outlook) on Friday, October 20, was moderate today.

In general, concern prevailed in the bond markets today after the US 10-year bond soared above 5%.

Bond yields as well as Greek bond spreads remained at last Friday’s levels, even though after the upgrade Greek government bonds can now be included in European indices, thus paving the way for capital inflows from institutional investors who are implicitly placed in the indices them.

Moreover, the market had already discounted the upgrade as the spread of Greek government bond yields compared to German Bunds and Italian BTPs has narrowed over the last 3 yearsreflecting the improved course of the public debt and the confidence of investors in the prospects of the Greek economy.

It is noted that the methodology of many bond indices requires at least one investment grade rating from S&P, Fitch or Moody’. Goldman Sachs in today’s analysis estimates that the review of the rating by Fitch on December 1st will be an important catalyst. It is recalled that this is the first time since 2010 that S&P has rated Greece’s government bonds at investment grade (IG). On September 8, DBRS Morningstar also upgraded Greece’s sovereign bonds to IG. The next rating reviews in 2023 are on December 1, 2023 by Fitch. The current rating is BB+ (1 notch below IG status).

In the secondary bond market today, and more specifically in the Electronic Transaction System (HDAT) of the Bank of Greece, transactions of 39 million euros were recorded, of which 31 million euros related to purchase orders.

The yield on the Greek 10-year bond stood at 4.38% from 4.39% that closed on Friday, versus 2.88% for the corresponding German bond, bringing the spread to 1.5%. In the foreign exchange market, the euro moves upwards against the dollar, with the result that in the afternoon the European currency trades at 1.0629 dollars from the level of 1.0598 dollars that opened the market.