LONDON, April 25 Standard & Poor's would be
likely to rate a proposed new euro zone 'safe bond' in the lower
half of the investment-grade category, the credit rating agency
said on Tuesday.
European safe bonds (ESBies) have been proposed as a way to
increase the supply of triple-A-rated euro-denominated assets
and reduce systemic risks from banks' large holdings of bonds
issued by their respective sovereign governments.
They centre on creating a special-purpose entity which would
issue two or more tranches of securities backed by a pool of
government bonds of the 19 euro zone members.
There would be no joint liability of euro zone member
governments or any other explicit form of combined sovereign
risk-taking, an important difference from the often discussed
idea of a common government euro bond.
"Given the lack of diversification of the sovereign bond
portfolio underlying ESBies, and the high correlation of euro
zone sovereign default risk, we would likely rate ESBies in the
lower half of the investment-grade category," S&P said.
In a note, the rating agency also warned that ESBie issuance
might end up cutting the supply of top-rated euro zone debt
rather than increasing it.
"We believe that ESBies will probably reduce the supply of
'AAA' rated assets ... since some 'AAA' rated sovereign bonds
are likely to be repackaged into lower-rated ESBies," S&P said.
(Reporting by Marc Jones; Editing by Catherine Evans)