Forex News – S&P downgrades Greece

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Greece was downgraded by Standard and Poor’s late on Monday, the second downgrade following from Fitch last week, as a result of the bond exchange plan.

S&P cut Greece’s long-term credit rating to ‘selective default’  but said it would likely raise it back to the speculative ‘CCC’ category once the debt exchange is concluded.

In an official statement S&P said   “We lowered our sovereign credit ratings on Greece to ‘SD’ following the Greek government’s retroactive insertion of collective action clauses (CACs).”

The bond swap deal with Greek bondholders, was formally launched last Friday. Under a deal agreed on with European policy makers last week, bondholders will take losses of 53.5 percent on the nominal value of their Greek holdings, with actual losses put at around 74 percent.

Following the ratings cut, Greece said the downgrade was expected and would not hurt its banks since the central bank had already made provisions for it.

Currency markets were hardly affected by the news, as this downgrade was already priced in. Euro opened higher in the European trading session, mostly in anticipation of the European Central Bank’s LTRO operation tomorrow.