Scope Upgrades Greece and S&P Upgrades Cyprus Credit Ratings

Macro/Political:

• On Wednesday (23/09), Greece will auction 26 Weeks T-Bills with maturity March 24^th, 2027. The amount to be auctioned is EUR 400mn.
  Source: PDMA

• PM Kyriakos Mitsotakis said on Sunday that Greece could consider temporarily reducing its high fuel taxes amid the cost-of-living crisis, provided it receives the go-ahead from the EU. At the same time, the Prime Minister said subsidies would be increased across the board for all forms of heating, with priority given to areas that experience particularly harsh winters, while fuel subsidies would be extended through October.
  Source: Kathimerini

• Moody’s affirmed Greece’s credit rating at Baa3, while changing the outlook from stable to positive. The agency noted that the affirmation of Greece’s Baa3 rating reflects the country’s solid reform track record, structurally favourable debt affordability metrics, and significant improvements in public finances, as well as structural challenges to the credit profile, such as still-high government debt, large external imbalances, modest productivity growth, and the substantial stock of distressed debt outside the banking system, which weighs on indebted households and firms.
  Furthermore, the outlook change reflects upside risks to Greece’s credit profile. There are increasing signs that the authorities’ continued focus on structural economic and institutional reforms is bearing fruit in the form of increased economic and fiscal resilience that could exceed the agency’s current expectations. Moreover, according to the agency, greater resilience would support the government’s capacity to sustain the multi-decade process of debt reduction, including continuing to prepay some of its crisis-era debt. Finally, the positive outlook reflects growing, although not yet assured, confidence that recent fiscal gains, including the political consensus in favour of maintaining the path of debt reduction, will prove durable through fluctuations in the economic cycle.
  Moody’s noted that the rating could be upgraded if it sees a credible multi-year package of structural economic and institutional reforms that would build upon the progress of the past decade. Furthermore, the agency added that an ongoing commitment to debt reduction would also be supportive of a rating upgrade, but on its own would likely be insufficient for an upward movement in the rating. Additionally, the positive outlook indicates that a rating downgrade is very unlikely, but the outlook could return to stable if future governments did not continue with the process of structural economic and institutional reform, or if their commitment to debt-reducing primary surpluses were to weaken. While unlikely over the foreseeable future, downward pressure on Greece’s credit profile could arise in a scenario of a further escalation in geopolitical risk, in the context of Russian aggression against a NATO country in Europe.
  Source: Moody’s

• Scope upgraded Greece’s credit rating to BBB+, from BBB, and revised the Outlook from positive to stable. According to Scope, the upgrade reflects a rapidly declining public debt ratio and strengthening fiscal sustainability, supported by large primary surpluses, structural improvements in tax administration and compliance, and a track record of prudent fiscal management. Furthermore, it reflects improving economic resilience and medium-term growth prospects, supported by sustained reform implementation, strong investment dynamics, and substantial EU-funded investment programmes. The agency noted that the Stable Outlook reflects its view that the risks to the rating over the next 12–18 months are balanced. The upside scenarios for the rating and Outlook include a structural strengthening of Greece’s growth potential, reflected in sustained reform implementation, stronger investment and productivity growth, a durable improvement in the country’s external position, and a sustained improvement in fiscal fundamentals leading to a materially lower public debt burden. Meanwhile, the downside scenarios for the rating and Outlook include a material deterioration in fiscal fundamentals leading to a sustained deviation from the projected debt reduction path and weakening debt sustainability metrics, as well as a sustained weakening of economic resilience and growth prospects, reflected in a reversal of structural reform progress, lower investment and productivity growth, and/or a weakening of the country’s external position.
  Source: Scope

Markets:

• Alpha Bank announced voluntary cash tender offer in respect of it EUR 500 senior preferred notes (ISIN: XS2388172855) due in 2028. Furthermore, Alpha Bank raised EUR 700mn at a yield of (MS+85bps) through the issuance of 4.5NC3.5 senior preferred bond. Demand was very strong with final order book closing above EUR 2.9 bn.
  Source: Bloomberg

• Piraeus Bank will announce 9M26 earnings on Friday the 20^th of October.
  Source: Euronext Athens

Macro/Political:

• S&P upgraded Cyprus’s credit rating to A from A- and revised the outlook to positive. According to the agency, the upgrade reflects its view that the Cypriot government continues to deleverage, as windfall revenues from a resilient economy and a strong labour market underpin significant fiscal surpluses, with government debt expected to fall to 31% of GDP by 2029 from 97% of GDP in 2020. Furthermore, Cyprus’s external debt is also declining, driven by robust services exports and foreign direct investment inflows, including reinvested earnings, which consistently offset high net imports of goods and primary income outflows. Finally, the agency views the effects of the Middle East war on Cyprus as limited, although disruptions are likely to persist into 2027, including a short-term decline in tourism, inflationary pressures, and a further widening of the current account deficit due to increased energy import costs. The positive outlook reflects the possibility that Cyprus’s external metrics could strengthen further, and its external vulnerabilities could diminish more rapidly than currently expected, supported by a sustained decline in net external leverage. According to S&P, it could revise the outlook to stable or lower the rating if an external shock, including from the war in the Middle East, were to exert significant pressure on Cyprus, a small and open economy, resulting in a sustained reversal of its public finances, growth, and FDI trajectories. The agency noted that it could raise the rating if Cyprus’s external vulnerabilities diminished further over the next two years, for example, through accelerated external deleveraging or a broadening of the export base, particularly through higher value-added business and information, communication, and technology (ICT) services.
  Source: S&P Ratings