Well, some of ‘em.
Reuters reports that Citi is about to eject Greek government bonds from its World Government Bond Index (WGBI), after Moody’s, the last agency to rate the Hellenic Republic above junk status, cut the country from A3 to Ba1 on Monday. The bonds will also be removed from Citi’s EMU Government Bond Index (EGBI) and the World Broad Investment-Grade (WorldBIG) Bond Index.
According to Barclays Capital, the downgrade means Greece will be out of most major bond indices (iBoxx, Barclays Series B Euro govt, etc.). And according to BarCap’s estimates mutual and pension funds, and other indexed holders, will now be looking to sell some €20bn worth of GGBs.
But (luckily?) they are eligible for another bond index.
JP Morgan’s Emerging Markets Bond Index Plus (EMBI+) :
Moody’s 4 notch downgrade of Greece to Ba1 (below IG) now makes Greece sovereign debt eligible for inclusion in the EMBI+ index, currently only the Greece 4.625% 2013s are eligible for the EMBI+, but don’t meet the necessary liquidity criteria for inclusion. Greece is not eligible for the EMBIG/Diversified series due to its high income status.
(H/T Marc Ostwald at Monument Securities)
There’s been some commentary that the last time Greece was placed in an emerging bonds index, in 1999 with JP Morgan’s EMBI Global (EMBIG) — the Greek government protested profusely.
But we’re guessing the Greek authorities won’t be so finicky, this time ’round.
From an April FT report:
Athens is deliberately targeting emerging market investors, who only buy debt that pays high yields, as demand has dropped markedly on successive bond deals in Europe.
Related links:
ECB extends financial lifeline to Greece – FT Alphaville
In the event of a Greek default… - FT Alphaville