LONDON Aug 1 Greek bond yields slipped on
Friday, slightly outperforming other lower-rated euro zone bonds
as investors anticipated a credit ratings upgrade from Moody's
later in the day.
Moody's has an extremely speculative Caa3 rating on Greece,
the worst in the euro zone. It is scheduled to review the rating
on Friday. Any announcement will come after the market closes.
Some market participants say an upgrade looks possible.
Greece's economic outlook has improved and its held two
successful debt sales this year, after its 2012 default.
Moody's one-notch upgrade of Portugal's ratings despite the
problems facing its biggest bank fuelled expectations of similar
action for Greece.
Greek 10-year bond yields were down 2 basis
points at 6.04 percent, bucking the upward trend on other
lower-rated debt. Their yields were 1 to 4 bps higher on the
"Moody's is still a lagging the other rating agencies, so a
bit of a catchup upgrade for Greece by about up to two notches
is very possible," said Rainer Guntermann, a strategist at
Commerzbank. "It won't come as a big shock to the market, but as
always with official confirmation some accounts may feel more
comfortable in adding to their positions (on Greek bonds)."
Italian and Spanish 10-year yields were up 4 bps at 2.73
and 2.55 percent respectively.
Investors were cautious before a U.S. jobs report that may shed
light on when the Federal Reserve will end its ultra-easy,
risk-friendly monetary policy.
U.S. non-farm payrolls, due at 1230 GMT, were forecast to
show 233,000 jobs were added last month and the unemployment
rate held steady at 6.1 percent.
Some traders said the market was already positioned for a
strong figure and would need to see a big number - 250,000 and
above - for a durable upward move in U.S. Treasury yields.
The effect of potentially higher U.S. yields on euro zone
bonds should also be tempered by Thursday's report on inflation
in the region, which fell to its lowest in almost five years in
"If expectations for the Fed's gradual normalisation in
policy do indeed pan out, then there is, we feel, a strong
argument to suggest that not only will core euro yields remain
well bid, but that the higher-yielding peripheral market will
see even greater demand," Rabobank strategists said in a note.
"Yield hunters (will) look to a corner of the rates world
that is, for the time being, going to remain very much supported
by an ECB that is very much on a mission."
(Editing by Larry King)