Last Friday’s decision by Standard & Poor’s to upgrade National Bank of Greece’s covered bonds to investment grade will be crucial for the Greek lender in its accessing international markets and contributing toward the general improvement of liquidity in the local market. And it will be especially so if the European Central Bank decides against retaining the “waiver” on Greek government bonds after the bailout program ends next month.
For the first time after the outbreak of the financial crisis, S&P raised a Greek bond to investment grade. This is the three-year, 750-million-euro covered bond that NBG issued last October, designed by the bank in such a way that it would become eligible for the ECB bond-buying program in the context of the extension of its quantitative easing (QE) policy. The latter will now last till the end of 2018, although Greece has not yet been included in it, contrary to government estimates about a year ago.
S&P also upgraded Piraeus Bank’s Estia I debt portfolio last week. Both NBG’s and Piraeus’s securities now have a rating of BBB-, four notches above the B+ rating Greece was recently upgraded to.
NBG sources say that the covered bond in question has the highest credit rating out of all those issued by the banking system. Therefore it is the only one to be eligible for the ECB’s refinancing mechanism, securing zero costs for owning it and a further positive course on the secondary market.
That move also adds to the quality expansion of National’s investment base, and offers a boost to the plans of Greek banks in general regarding their return to the capital markets through new bond issues – adding to the market’s cash flow too – though not before the state has issued a new sovereign bond.