20150423-穆迪服务-Yield_s_Trajectory_—_More_a_Gentle_Rise_than_a_Steep_Lift-Off_27页_489kb

Summary of Moody's Weekly Market Outlook: Yield's Trajectory — More a Gentle Rise than a Steep Lift-Off

Core Content

Moody's Weekly Market Outlook discusses the trajectory of interest rates, particularly Treasury bond yields, and their implications for credit markets and the broader economy. The report highlights that while the Federal Reserve's interest rate policy is expected to expire, the anticipated rate increase of no more than 0.5% by year-end 2015 may not be sufficient to trigger a bear market for equities and credit. Instead, the rise in yields is likely to be gradual and modest, influenced more by the underlying pace of business activity than by the fed funds rate alone.

Main Views

• Interest Rate Trajectory: The report suggests that the rise in interest rates will be more of a gentle slope than a steep increase, due to the limited impact of the Fed's rate hikes and the broader economic environment.
• Economic Growth Prospects: The U.S. is expected to see a modest real GDP growth rate of 2% to 2.5% over the next decade, driven by productivity growth and a shrinking labor force.
• Credit Market Outlook: Corporate credit spreads, both for high yield and Baa-rated bonds, are currently above what is predicted by standard economic models, indicating heightened risk aversion.
• Emerging Markets: Emerging markets have not provided sufficient offset to the slowdown in advanced economies, with China's manufacturing and GDP growth remaining weak.
• Demographic Shift: A significant demographic shift in the U.S. is expected, with a declining working-age population and a rising elderly population, which could influence financial markets in the long term.

Key Information

U.S. Credit Market Trends

• High Yield Bond Spreads: The median offering yield for high-yield bonds in April 2015 was 5.75‰, and the recent spread of 460 bp is expected to decrease to 445 bp by year-end 2015.
• Investment Grade Bond Spreads: The spread for investment-grade bonds is expected to remain under 131 bp by year-end 2015.
• Defaults: The U.S. HY default rate in March 2015 was 1.9%, with an average of 2.5% in 4Q/2015.
• Bond Issuance: U.S. dollar investment-grade bond issuance is projected to grow by 7% to $1.203 trillion in 2015, while high-yield issuance is expected to decline by -2% to $415 billion.

U.S. Economic Outlook

• GDP Growth: First-quarter 2015 GDP growth is forecasted at 1.0%, with the potential for growth to rise to 3% if consumer demand strengthens.
• Consumer Confidence: The Conference Board Consumer Confidence Index is expected to rise to a three-month high, reflecting solid job and income growth conditions.
• Personal Income & Spending: Personal income is forecasted to grow by 0.2%, while spending is expected to rise by 0.5%, indicating continued consumer demand.
• Construction Spending: Construction spending is expected to increase by 0.5% in March, with housing starts showing a modest rise.

European Economic Outlook

• Euro Zone Recovery: The euro zone's recovery is fragile, with inflation expected to decline and unemployment to drop to 11.2%.
• Spain: Spain's real GDP growth is expected to be 0.7% q/q, with retail sales likely to rise by 2.4% y/y in March. However, the housing market remains under pressure due to political uncertainty and tight credit conditions.
• Italy: Italy's consumer confidence is expected to rise to 111.5, and the economy is predicted to rebound in 2015 with real GDP growth of about 0.4%. This is supported by accelerating credit growth and strong foreign demand.
• France: French job seekers are expected to increase to 3.5 million, and household consumption is projected to rise by 0.5% m/m and 2.9% y/y in March. However, high unemployment and tight credit conditions continue to limit spending on durable goods.

Emerging Markets and Global Trends

• China: China's manufacturing activity remains weak, with the HSBC PMI index for manufacturing at 49.2 in April 2015, the lowest since the Great Recession. Real GDP growth for Q1-2015 was 7.0%, the smallest since Q1-2009.
• Industrial Metals: The deflation in industrial metals prices is consistent with below-trend growth in emerging markets, with Moody's base metals price index down by -13% from a year earlier.

Global Factors Affecting Markets

• Strong Dollar: The strong U.S. dollar is putting downward pressure on import and export price indices, which could affect corporate pricing power and credit spreads.
• Fiscal and Monetary Policy: The European Central Bank's stimulus measures are pushing money supply growth higher, but fiscal discipline remains a concern in several euro zone countries.

Conclusion

The report underscores that while the Fed's rate policy is expected to expire, the impact on financial markets may be limited. The credit market remains cautious, with spreads exceeding model predictions due to concerns about slow business activity. Emerging markets, particularly China, continue to underperform, and demographic changes in the U.S. may have long-term implications for financial markets. The global economic outlook remains mixed, with continued deflationary pressures and uncertainty over fiscal and monetary policies.