GGBs See Some Light Outperformance After Scope Upgrade

GGBs are the general EGB outperformer across most of the curve in early Monday trade after Greece attained IG status at Scope Ratings on Friday (the second such move from the lower tier rating agencies last week, following R&I).

• As we have noted elsewhere, that doesn’t mean much for bond index inclusion, nor ECB purchase eligibility, and the move was widely expected.
• 10-Year GGBs hover a little off recent closing cycle tights vs. both Bunds & BTPs.
• In light of Scope’s move Commerzbank note that while it “probably paves the way for further upgrades into the IG universe by other rating agencies, the immediate market impact from IG should be limited as Scope's ratings do not (yet) play a role in the major bond indices or ECB eligibility.”
• “DBRS (BB high/stable) will be next on 8 Sep, followed by Moody's a week later (with Greece still three notches away from IG) and S&P and Fitch following in Q4. At least two IG ratings are needed for inclusion in the main indices. While GGB spreads seem already rich from a fundamental point of view, we expect Scope's upgrade to resonate in the form of tightening spreads in coming sessions.”