MARKETS

Investment grade possible within 2022

investment-grade-possible-within-2022

Greece could attain investment grade in its credit rating during the course of this year, by continuing with its reforms, utilizing the resources of the Next Generation EU fund and maintaining a stable political landscape.

The government’s objective is to reach that milestone in the first half of next year, but the earlier Greece makes it, the more benefits it will enjoy, not only via its inclusion in the European Central Bank’s quantitative easing (QE) program, but also by way of the expansion of the investment audience for its bonds; that would in turn signify the formation of high-resilience assessments in the case of possible credit unrest, as the Bank of Greece has noted.

Danske Bank chief analyst on bond markets Jens Peter Sorensen notes that further rating upgrades are anticipated this year for Italy, Portugal and Greece, with this country achieving investment grade for the first time after 11 years.

He goes on to forecast that rating agencies will maintain a positive stance toward ratings throughout the year, as the EU states continue to reduce their budget deficits and the ECB support with the NGEU resource should prove credit positive.

JPMorgan has presented its possible rating action by the four major agencies (Moody’s, S&P, Fitch and DBRS Morningstar) for eurozone members, estimating that Greece has the greatest chances of an upgrade and believing it will soon climb to investment level.

The US lender expects positive moves this year for smaller states, with Greece regaining investment grade in late 2002 or early 2023. It specifically calculates a 90% chance of an upgrade of Greece’s sovereign rating by Moody’s and a 75% chance of an upgrade by S&P, Fitch and DBRS – these rates are the highest among eurozone members. Regarding Cyprus, JPMorgan sees a 60% chance of an upgrade by Moody’s and a 30% chance of upgrades by S&P, Fitch and DBRS.

Concerning Greece especially, the US bank says that given the strong agenda of reforms and the additional push by the disbursement of the NGEU resources, and the stable political context, the country should enjoy a continuously positive momentum in its assessments, with decent chances of regaining investment grade from at least one of the main four rating agencies by the end of 2022 or early 2023 at the latest.