GLOBAL - The recent downgrade of nine euro-zone countries could result in the German government altering investment regulations for two of its pension reserve schemes, the interior ministry has said.

Currently, the two schemes - acting as pension reserves for civil servants retiring from 2017 - manage more than €5bn between them, with bond investments only allowed if the product is rated AA by three agencies.

However, following last Friday’s downgrade by Standard & Poor’s of French and Austrian government debt to AA+, only 13 countries retain its highest rating - including fellow euro-zone countries Netherlands, Germany, Finland and Luxembourg, as well as Canada and Australia.

A spokesman for the interior ministry, which oversees the reserve schemes, confirmed that discussions were underway with the federal ministry of finance on whether, in light of recent developments, the investment regulations should be modified.

Asked about the triple confirmation of a bond’s AAA rating, the spokesman said: “These are, of course, high prerequisites for investment, but there are indeed discussions underway on if changes to investment regulations are needed.”

He said he was unable to speculate on the discussion’s outcome, but added: “There can be good reasons to retain the AAA standard.”

S&P’s downgrade further affected the European Union’s bailout fund, the European Financial Stability Facility (EFSF), with the agency reducing its rating to AA+ on Monday.

France underwrites, alongside Germany, nearly half of the scheme responsible for bond issuance to fund the bailouts of Portugal, Italy and Greece.

However, the EFSF was nonetheless successful in issuing its first six-month bonds, with €4.6bn in interest attracted for the €1.5bn sale.

While it is the first paper issued since its downgrade, as well as the first six-month bond, yields of 0.2664% were comparable with the 0.2222% yield of three-month bills from mid-December.

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