20171214-穆迪服务-EDFs_for_Greece_and_Spain_Lowest_in_Years_19页_969kb

Moody's Sector In-Depth Summary: Greece and Spain (December 14, 2017)

Core Content Overview

This document provides an analysis of the sovereign credit risk of Greece and Spain based on Moody's market-based measures, specifically the CDS-Implied EDF (Expected Default Frequency) and CDS spreads. It highlights the improvement in credit risk metrics for both countries, along with insights into how political events and economic conditions have influenced these measures over time.

Key Information

• Moody's Capital Markets Research (CMR) focuses on interpreting signals from the credit and equity markets to assess risks and investment opportunities for issuers and sectors.
• The EDF is derived from CDS spreads and reflects forward-looking probabilities of default, adjusted for loss-given default and the market price of risk.
• CMR is part of Moody's Analytics, which is legally and organizationally separate from Moody's Investors Service (MIS), the rating agency.
• CMR does not offer investment advisory services or products.

Greece

• Current EDF (5-Year): 2.19%, which is the lowest in three years.
• CDS Spread (5-Year): 421 bp, a steady decline from 481 bp on October 31.
• Historical Trends:
  • On March 6, 2017, the EDF was at 4.6% and the CDS spread at 992 bp.
  • In 2015, the EDF spiked to 26.0% and the CDS spread to 481 bp, but has since declined.
• CDS Implied Ratings:
  • 1-Year: B3 (up from Caa2 on July 6, 2015)
  • 5-Year: B3
• Moody's Investors Service Rating: Caa2 with a positive outlook.
• Economic Context:
  • Greece has experienced three consecutive quarters of economic expansion.
  • Despite ongoing economic crisis and skepticism among Greeks, investors are showing more confidence in the country's future.
  • The EDF has been on a lengthy improvement trend, reflecting reduced default risk.

Spain

• Current EDF (5-Year): 0.22%, significantly lower than Greece's 2.20%.
• CDS Spread (5-Year): 56 bp, showing a recent downtrend from 72 bp on October 27.
• Historical Trends:
  • The EDF peaked at 0.28% in April and experienced fluctuations due to the Catalan independence movement.
  • The EDF dropped to a low on October 12 after the referendum but rose again on October 27 due to continued political instability.
• CDS Implied Ratings:
  • 1-Year: B1
  • 5-Year: B3
• Long-Term EDF Trends:
  • In June 2013, the EDF was 0.96% and the CDS spread was 286 bp.
  • By September 2014, the EDF dropped to 0.17% and the CDS spread to 54 bp.
  • The EDF has remained in a range of 0.24% to 0.28% since then.
• Economic Context:
  • Spain has shown economic improvement following difficult years.
  • The EDF and CDS spread have generally trended downward, indicating improved investor sentiment.
  • Political events, particularly the Catalan independence referendum, caused short-term volatility in EDF and CDS spread.

Key Observations

• Credit Risk Trends: Both Greece and Spain have seen a steady decline in EDF and CDS spread over the past few years, indicating improved sovereign credit risk.
• Political Impact: The Catalan independence movement had a significant short-term effect on the EDF and CDS spread, but the measures have since stabilized.
• Investor Confidence: Despite Greece's ongoing economic challenges, investor sentiment has improved, leading to a more favorable outlook.
• Market-Based Metrics: EDF and CDS spreads are key indicators of market-based sovereign credit risk and are used to complement fundamental analysis by MIS.

Summary of Recent Trends

Figure Reference

• Figure 1: Shows the 5-Year CDS-Implied EDF for Greece and Spain over the past three years, indicating a downward trend.
• Figure 2: Provides a visual representation of rating changes for Greece and Spain over the last five years, reflecting reduced volatility and improved ratings.

Additional Insights

• The document also includes data on other countries in Europe and Asia-Pacific, showing their respective EDF, CDS Implied-Rating, and Bond Implied-Rating changes.
• These metrics are used to assess the overall credit risk environment and provide insights into market sentiment and potential investment opportunities.

Conclusion

The document highlights a significant improvement in the sovereign credit risk profiles of Greece and Spain, as reflected by declining EDF and CDS spread metrics. While Greece continues to face economic challenges, investor sentiment has improved, and Spain has shown steady economic recovery. Political events, such as the Catalan referendum, had a short-term impact but did not lead to long-term deterioration in credit risk. The EDF and CDS spread metrics are key tools for assessing credit risk and provide valuable insights into the market's perception of sovereign default probability.