Moody's upgrades Greece by two notches

Moody's raised Greece's sovereign credit rating late on Friday and gave it a stable outlook, saying it believed the government's fiscal position had improved significantly.

The positive comments boost expectations that Greece's government may tap bond markets again this year after two sales in April and July following a four-year exclusion since it was bailed out by the European Union and the International Monetary Fund.

"The first factor behind the upgrade of Greece's rating is Moody's strengthened expectation that the general government debt to GDP ratio will start declining in 2015," Moody's said.

"The government's progress in fiscal consolidation under its economic adjustment program underscores the improvement in the debt trajectory," it said in a statement raising its rating by two notches from 'Caa3' to 'Caa1'.

Fitch assigns Greece a B credit rating, while S&P rates it B-/B. All three credit ratings are still in junk territory, reflecting a high debt level of about 175 percent of the country's gross domestic product.

Moody's expects Greece's debt to GDP ratio to decline in 2015 after peaking this year at around 179 percent of GDP. The ratings agency said Greece's short-term debt rating is unaffected and remains "Not Prime."

Greece, which has been bailed out twice by the EU and the IMF with nearly 240 billion euros in rescue loans, is expected to begin negotiating further debt relief in the fall.

In September, it will undergo the latest checkup by inspectors from its foreign lenders on whether it is meeting the commitments attached to its bailout before further aid is disbursed.

Moody's said Greece's structural reform drive had "mixed results" to date, but praised the government's efforts on labor market...