(Recasts with fall in Greek yields, adds analyst comments)
By Emelia Sithole-Matarise
LONDON, April 7 Greek yields fell to a four-year
low on Monday as investors responded to stronger signals that
the European Central Bank could embark on asset purchases this
year to fight potential deflation.
Investors shrugged off the lack of a statement from Moody's
on Friday, when it was widely expected to give an update of
Greece's credit ratings under new EU rules requiring rating
agencies to lay out the dates on which they review a country's
Some market participants had expected Moody's to lift
Greece's ratings by as much as two notches from Caa3, which is
nine notches below investment grade. Standard & Poor's and Fitch
rank Greece six notches below investment grade at B-.
Demand for the country's bonds remained intact in a broadly
rallying market after a German newspaper report on Friday added
weight to possible bond-buying stimulus in the form of
quantitative easing from the ECB.
This came a day after ECB President Mario Draghi said
policymakers were unanimous that asset purchases might be needed
to tackle persistently low inflation.
"There was some hope that maybe Moody's would change the
ratings or at least change the outlook but they haven't done
that," said RIA Capital Market strategist. "Even taking into
account the Greek government bond market is doing well and
investors are just looking for yield pick-up with the ECB's
accommodative stance at this juncture."
Greek 10-year yields were 2 basis points down on
the day at 6.12 percent.
They have fallen as much as 50 basis points over the past
week as Greece lined up a group of banks for a planned issue of
five-year bonds, which could come as early as this week, marking
the country's return to the market two years after it defaulted.
Other peripheral euro zone bond yields were mostly lower,
with Italian 10-year yields hitting a record low of
3.15 percent on the speculation about potential QE.
German newspaper Frankfurter Allgemeine Zeitung said on
Friday the ECB had modelled the effects of buying a trillion
euros of assets to ward off deflation.
"At the moment the periphery, especially now we have got
this QE talk, is massively supported. That's the most obvious
trade in town," a trader said.
(Editing by John Stonestreet)