Will credit agencies upgrade Greece’s national credit score?

Challenge

The marquee benchmark by which a country’s debt is priced is its credit rating. Even when underlying factors make an obvious case for a rating upgrade or downgrade, an official change by one of the major agencies still results in large market moves.

Solution & Analysis

Predata signals can provide clients with advanced warning of upgrades or downgrades in county credit ratings. The Predata Greek credit signals are trained to anticipate various credit rating announcements from the three major ratings agencies. When elevated, they signify an increased likelihood that there will be a credit rating upgrade within the next month. Each of these four signals are comprised of the same set of 349 digital sources covering Greek politics, the Greek economy, Greek social issues, and subjects or institutions related to the European sovereign debt crisis. The Predata machine-learning algorithms identify distinct patterns of activity among those sources that tend to precede ratings announcements of a certain type.

Result

In June 2018, the Predata signals picked up increased activity on web pages related to European regulatory measures and Greek government authorities. Similar patterns were present prior to previous credit rating upgrades in February (by Fitch and Moody’s). The consistency of these patterns caused the signals to rise, indicating a high probability of another impending upgrade announcement. Two weeks later after the rise in Predata’s signals, S&P upgraded Greek debt from B to B+.