S&P Downgrades Greece to B; Moody's Places Greece B1 Bonds On Review For Possible Downgrade; 2-Year Greek Bonds Yield 25%

Source: Wikimedia Commons
Before reading these announcements, look at what Greek bonds are yielding as of May 10, 2011. Click the link for the Bloomberg quote.

3-month Greece Government Bond 8.06% (updated on May 9); 
6-month Greece Government Bond 6.13%;
1-year Greece Government Bond 6.26%;
2-year Greece Government Bond 25.17%;
5-year Greece Government Bond 16.377%,
10-year Greece Government Bond 15.43%,
30-year Greece Government Bond 10.41%.

From Moody's Investors Service yesterday:
"Moody's places Greece's ratings on review for possible downgrade

London, 09 May 2011 -- Moody's Investors Service has today placed Greece's B1 local and foreign currency government bond ratings on review for possible downgrade.

Moody's decision to initiate this review was prompted by:

(1) revisions to fiscal metrics, most notably the significant upward revision of the 2010 general government deficit;

(2) increased uncertainty about the sustainability of Greek sovereign debt in the context of potential delays in the achievement of fiscal consolidation targets; and

(3) concerns about the probability and the implications of a delayed and weaker economic recovery.

Moody's review will focus on the factors that will drive the country's debt dynamics over the next few years.

Moody's says that a multi-notch downgrade is possible if it concludes that there is large risk that Greece's debt metrics are on an unsustainable path. In Moody's view, such conditions would materially increase the risk of debt restructuring over the short to medium term. Under such conditions, euro area policymakers have stated that future loans from the Exchange Stability Mechanism would be extended only if private creditors were to bear some of the losses. If the path of Greek debt-to-GDP were to appear unsustainable, then Greece might itself have an incentive to seek a change in the terms of its debt obligations." [continue reading at Moodys.com]

From Standard and Poor's on May 9, 2011:
"Ratings On Greece Lowered To 'B/C' From 'BB-/B' On Rising Rescheduling Risk; Remain On CreditWatch Negative

MADRID (Standard & Poor's) May 9, 2011--Standard & Poor's Ratings Services today said that it has lowered its long- and short-term sovereign credit ratings on the Hellenic Republic (Greece) to 'B' and 'C', from 'BB-' and 'B', respectively. Both the long- and short-term ratings remain on CreditWatch, with negative implications, where they were first placed on Dec. 2, 2010, and March 29, 2011, respectively. On May 9, 2011, Standard & Poor's '4' recovery rating for Greece remains unchanged--indicating an estimated 30%-50% recovery upon default--and its 'AAA' transfer and convertibility assessment for Greece, which applies to all members of the eurozone, also remains unchanged. 
The downgrade reflects our view of increasing sentiment among Greece's key eurozone official creditors to extend the debt payment maturities of their €80 billion of bilateral loans pooled by the European Commission. As part of such an extension, we believe the eurozone creditor governments would likely seek "comparability of treatment" from commercial creditors in the form of their similarly extending bond and loan maturities." [continue reading at standardandpoors.com]

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