July 6 (Bloomberg) -- RBC Capital Markets said Portugal’s government bonds will probably be removed from a Markit iBoxx sovereign debt index after Moody’s Investors Service cut the nation’s credit rating to below investment grade.
The average rating between Moody’s, Standard & Poor’s, and Fitch Ratings will “drop to sub-investment grade in the definition used by iBoxx, and Portuguese government bonds will consequently drop out of the iBoxx Euro Area Sovereign Index after the month-end index adjustment,” Norbert Aul, a European rates strategist in London, wrote in a note received yesterday.
Because the move will add to the “negative” market environment, RBC ended recommendations to buy Spanish two-year notes against similar-maturity German debt and to sell September bund futures, Aul wrote.
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