GGBs Insulated Following S&P Upgrade

GGBs yields are broadly flat early on following S&P's decision to upgrade Greece to Investment grade (BBB-; Outlook stable).

• This has provided some insulation for GGBs as wider core global FI markets sell off, even though the IG attainment was widely expected.
• As we flagged ahead of time, light tailwinds for GGBs were to be expected as some funds/indices only require one IG rating from the ‘big 3’ for inclusions/investment, although the major bond market indices won’t include GGBs until 2 of the ‘big 3’ have Greece at IG.
• This leaves the 10-year GGB/Bund spread 4.5bps tighter at 144bps, while the spread of BTP/GGBs is 1.3bps wider at 56.5bps. BTPs move off early bests, after some ratings respite from S&P (covered earlier).
• In the details, S&P noted that "Greece's public finances are improving thanks to the budgetary consolidation efforts", with significant progress being made in "addressing Greece's economic and fiscal imbalances".
• With the incumbent political party attaining a majority in this year's election, S&P expect robust economic growth and continued falls in Government debt as a result of "additional structural economic and budgetary reforms, coupled with large EU funds".