* Low-rated bonds inch up after Greece, Spain upgrades
* Moody's verdict on France, Slovenia awaits
* Strategists say outlook shaky with elections, holidays
By John Geddie
LONDON, May 23 Lower-rated peripheral bonds
inched up on Friday with niggling EU election concerns curbing
enthusiasm over the latest round of ratings upgrades.
Fitch lifted Greece's rating for the second time in a year
on Friday, while Standard and Poor's followed through with a
widely-expected upgrade on Spain.
Prices in peripheral bonds have stabilized after a sharp
sell-off, but with EU election results set to be released on
Sunday and ahead of long weekends in the UK and the US, trading
volumes are tipped to be fairly subdued on Friday.
"The periphery has rallied off their lows but I'm not sure
how much more mileage there is left in it," said Marc Ostwald, a
strategist at Monument Securities.
Italian and Spanish 10-year
yields opened 2 basis points lower at 3.03 and 3.22 percent
respectively. Greece was 1 bps down at 6.51 percent, while
Portugal and Ireland were unchanged at 2.85 and 3.87 percent.
Fitch praised Greece's improving fiscal track record as it
lifted its rating to B from B- with a stable outlook. It becomes
the most bullish agency on the country which defaulted just two
years ago, although its rating is still five notches below
Standard and Poor's brought its rating for Spain in line
with Moody's, lifting it to BBB from BBB- based on its economic
prospects. Fitch remains the most optimistic on Spain, with its
rating of BBB+ one notch above the other two main agencies.
S&P also affirmed the Netherlands at AA+ with stable
outlook. Moody's is scheduled to deliver its verdict on France
and Slovenia later on Friday, with the former widely rumoured
for a downgrade and the latter tipped for an upgrade.
In other positive signs for the periphery, Portugal's public
sector deficit fell 11.3 percent in the first four months of the
year to below the level forecast in the government's budget, the
Finance Ministry said late Thursday. The fall was boosted by a 5
percent increase in tax revenues.
However, strategists are recommending investors to favour
safe haven bonds on Friday ahead of EU elections which could
destabilize some of the euro zone governments.
In Greece, a strong showing by anti-bailout parties may hurt
an already-fragile coalition, potentially paving the way to
national elections. In Italy, a poor result for Prime Minister
Matteo Renzi's party might weaken his drive for the swift
reforms he promised when he took power in a party coup.
"The short-term outlook ahead of the weekend still looks
shaky...(German) Bunds look supported," said Commerzbank in a
German 10-year bonds are unchanged at 1.36
percent, just above year-to-date lows, with monthly readings on
the country's IFO business climate due out at 0800GMT.
(Editing by Toby Chopra)