Piraeus Bank – Bond pricing shows investment grade

The behavior of Greek government bonds in the markets shows that the country is close to securing an investment grade from the rating agencies, according to a new analysis by Piraeus Bank.

Using data on CDS government bond prices for the first quarter of 2004 to the third quarter of 2021 for 60-country bonds, the economists in the systemic group estimate a statistical model that allows them to be translated, as recorded in Bloomberg, into ” imputed” credit rating levels

According to this, the CDS markets price the Greek risk premiums at investment grade levels.

More specifically, the main conclusions from the analysis of Piraeus Bank are the following:

The evolution of the Hellenic Republic’s debt rating according to the international credit rating agencies (Moody’s, S&P, and Fitch) against the credit rating as it is “presumed” by the statistical model of the bank and the prices of the CDS of the states was examined.

The most immediate opportunity of the CDS market to integrate and reflect the current developments in both the downward (2008-2011) and the upward (2017-present) phase of the cycle becomes apparent.

At the same time, the significant degree of conservatism that governs the rating agencies is recorded, as the CDS markets price the Greek risk premiums at investment level levels, while the rating of the companies lags significantly behind this very essential milestone.

In addition, a comparison was made between the imputed credit ratings of Greece, Spain, Portugal and Italy.

This results in a significant upgrade of the course of Portugal, which while in 2011 showed behavior similar to that of Greece, slowly but gradually differs significantly and today is evaluated similarly to Spain.

“It is estimated that Italy is following the opposite course, which is now lagging behind Spain and Portugal, now following a course similar to that of Greece,” notes Piraeus Bank.