(Corrects S&P and Fitch ratings on Greece in para 5 to B- (not
By John Geddie
LONDON, April 4 The relentless rally in Greek
bonds seen over the past two years could be given a further leg
up on Friday, with ratings agency Moody's widely expected to
lift at least the rating outlook of the euro zone's weakest
Some market participants expect as much as a two notch
upgrade from Moody's, which would help its planned return to
"There is talk among investors that the country could return
to market as early as next week if Moody's do upgrade it," said
a trader at a market maker in Greek government bonds.
Greece hired a group of banks to manage the sale of a 2
billion euro five-year bond on Thursday, Thomson Reuters market
service IFR reported, with sources suggesting the bonds will be
issued sometime in April.
The country, which has been locked out of capital markets
since it accepted a bailout in 2010, is rated Caa3 by Moody's,
nine notches below investment grade. Standard and Poor's and
Fitch rank Greece six notches below investment grade at B-.
"The expected rating upgrade, and the subsequent return of
Greece, will give Greek yields another boost," said Christian
Lenk, fixed income strategist at DZ Bank.
Greek 10-year yields were unchanged on the day
at 6.13 percent.
DZ's Lenk said Greek yields could push through 6 percent,
returning to levels not seen since January 2010. Two bailout
packages worth 240 billion euros have been agreed since.
Other peripheral euro zone countries are also revelling in
borrowing costs that have reached multi-year lows, with markets
heartened by Thursday's promise from the European Central Bank
that it now unanimously agreed that outright money-printing - or
quantitative easing - was an option.
Spanish and Italian 10-year yields
were 4 basis points lower on the day at 3.19 percent and 3.22
percent, respectively, while Irish and Portuguese
equivalents were 5 bps lower at 2.97 percent and
In further evidence of the divergent inflation prospects and
central bank policy between the U.S. and Europe, Spanish
five-year yields dropped below U.S. Treasuries for the first
time since 2007 on Thursday.
Spanish five-year yields were at 1.78 percent, 2
bps below the U.S. equivalent at 1.80 percent.
That gap could widen further if the United States posts
strong employment growth via its non-farm payrolls data on
"We could see a minor rate rise is Europe (after the jobs
data) but there will be further widening of the transatlantic
spread because both markets and economies are in very different
states," said Lenk at DZ Bank.
(Editing by Toby Chopra)