Global Investing

Markets largely shrugged off ratings agency Moody’s move yesterday to downgrade Greece by four notches to “junk” status — Greece has already been trading like junk for a long time and Standard&Poor’s cut Greece to junk as long ago as the end of April.

But Moody’s move had one big impact on Greece — it has turned it once more into an emerging market. With two of the three major ratings agencies treating Greece as sub-investment grade — Fitch still rates it BBB-minus and says it has no immediate plans to cut — banks are reshuffling the indices which passive investors use to track global bond markets.

Citigroup said on Monday it was preparing to remove Greek government debt from its World Government Bond Index as it is no longer rated at investment grade by either S&P and Moody’s. Barclays Capital also said it will strip the paper from its index products.

But JP Morgan said Greek government bonds were now eligible for its Emerging Markets Bond Index Plus. Or they would be if not for the fact that that the only eligible bond, due in 2013, does not meet JPMorgan’s liquidity criteria for inclusion.

Poor Greece, it crawled its way up from emerging market status to join the then-two-year-old euro in 2001, at a time when no country in the euro zone would have  dreamt it could become junk.

Many analysts and investors, like Nigel Rendell, emerging markets strategist at RBC, are seasoned enough to remember the old days.

“There is some talk that Greece is an emerging market again,” Rendell says. ”I welcome it back.”