A Greek Orthodox monk speaks to protesters in front of the Greek Parliament… (Kostas Tsironis, Associated…)
Standard & Poor's downgraded Greece's government bonds, citing a "significantly higher likelihood of one or more defaults" by the Athens government.
The credit rating firm's lowering of Greece's rating to CCC from B reinforced a message that has been coming from the bond market since March: There's no way out of the country's debt morass without forcing bondholders to take some kind of haircut.
The Mediterranean nation is now the lowest-rated country graded by S&P.
Though S&P said it expected more financial help for Greece from the rest of the euro-zone countries, it also said it believes that "some official creditors will see restructuring of commercial debt as a necessary condition to such additional funding."
That's an apparent reference to calls by German Finance Minister Wolfgang Schaeuble for private bondholders to assume a "fair" share of another Greek bailout.
S&P said that forcing "burden sharing" on private bondholders "could take the form of a debt exchange offer or an extension of debt maturities."
In other words, bondholders wouldn't be stiffed entirely. Nonetheless, "In our view, any such transactions would likely be on terms less favorable than the debt being refinanced, which we, in turn, would view as a de facto default," S&P said.
In the bond market, the annualized yield on two-year Greek bonds rose back above 26% on Monday after falling as low as 22.7% early last week. The yield has rocketed from 14.4% in mid-March as the market price of the bonds has plunged.
Euro-zone finance ministers are expected to meet in Brussels on Tuesday to discuss Greece and other sovereign-debt issues.