Moody's Investors Service on Wednesday downgraded Greece's local and foreign currency bond ratings deeper into junk status, citing heightened risk that the country will fail to stabilise its debt position without a debt restructuring.

The rating agency downgraded Greece's local and foreign currency bond ratings to Caa1 from B1, and assigned a negative outlook to the ratings.

Moody's latest rating action on Greece concludes the review for possible downgrade that the rating agency initiated on May 9. Prior to that on March 7, Moody's had downgraded Greece's government bond ratings to B1 from Ba1 and assigned a negative outlook.

Moody's noted that Greece's Caa1 rating incorporates its assumption that current talks between the Greek government and the International Monetary Fund, the European Central Bank and the EU Commission will result in further official support for the Greek government and the announcement of additional austerity and structural reform measures.

The rating agency said the negative outlook on the Caa1 rating reflects ts view that the country's very large debt burden, the significant implementation risks in its structural reform package and the country's ongoing need for external support skew risks of future rating actions to the downside.

Moody's pointed out that over five-year investment horizons, around 50% of Caa1-rated countries, non-financial corporate and financial institutions have consistently met their debt service requirements on a timely basis, while the rests have defaulted.

Greece narrowly avoided default in May last year with the help of a €110 billion, or $153.85 billion, bailout from the EU and the IMF in exchange for measures to cut its deficit and liberalize its economy.

RTTNews