Despite the exceptional performance of Greek bonds during 2019, Societe Generale and Citigroup analysts believe that Greek yields will fall even further this year. They note that rating agencies’ cautious moves to date will be succeeded by several upgrades, starting with Fitch Ratings on January 24.
The Greek-Italian spreads have dropped to zero after another decline in yields yesterday that brought the benchmark 10-year bond down to 1.36 percentage points, a month-low, while the five-year yield fell to 0.47 percent, against 0.52 percent for its Italian peer.
Societe Generale anticipates Fitch will at least change its outlook for Greece to positive, if it does not go on to upgrade the country’s rating too. It notes in a report that the rating agencies may not admit it, but very often they end up monitoring the course of spreads, so there is a chance that investor demand will push Greece’s upgrades in 2020.
In a new note to clients, Citigroup says Greece’s fundamentals appear robust and the country’s prospects are better than those of Spain, thanks to the strong momentum of reforms and the potential for credit rating upgrades.