20171116-穆迪服务-Fewer_Defaults_Will_Stave_Off_Much_Wider_Spreads_30页_902kb

Moody's Weekly Market Outlook Summary

Core Content

This document is the Moody's Weekly Market Outlook, providing insights into the current state and future direction of credit markets, with a focus on U.S., Europe, and Asia-Pacific regions. It includes economic forecasts, credit spread analysis, default risk assessments, and market data. The report also highlights the potential impact of regulatory changes, interest rate movements, and geopolitical factors on financial markets.

Main Views

Credit Market Outlook

• High-Yield Bond Spreads: The high-yield bond spread has recently widened, but this is attributed to a correction in under-compensation for default risk, not a deterioration in corporate credit quality.
• Default Rates: Moody's forecasts that the U.S. high-yield default rate will average 2.2% in the third quarter of 2018, down from 3.2% in October 2017.
• Issuance Trends:
  • Investment Grade (IG): Expected to rise by 7.3% in 2017 to a new high of $1.515 trillion.
  • High Yield (HY): Issuance is expected to increase by 23.5% to $421 billion, still below the $435 billion peak of 2014.
• Fundamentals: The fundamentals of credit markets do not yet support a protracted widening of corporate bond yield spreads, but the primary drivers suggest spreads will likely remain above 400 bp over Treasuries.

Corporate Bond and Equity Market Outlook

• Profits Growth: If profits continue to grow, it should rein in high-yield spreads.
• Earnings-Sensitive Securities: The two biggest risks to these markets are:
  1. Interest Rate Increases impacting business activity.
  2. Widespread price hikes that exceed consumer affordability.
• Liquidity Concerns: Regulatory changes that limit financial institutions’ ability to own corporate bonds have increased liquidity risk, which could lead to wider spreads during financial stress.

Economic Forecasts

The Week Ahead – U.S.

• Consumer Price Index (CPI):
  • Headline: Expected to rise 0.1% in October.
  • Core: Expected to rise 0.2% (0.17% unrounded).
• Retail Sales:
  • Headline: Forecast to fall 0.1% in October.
  • Core: Forecast to remain unchanged.
• Jobless Claims: Expected to fall to 235,000 in the week ended November 11.
• Industrial Production: Expected to rise 0.7% in October, driven by auto production and hurricane-related payback.
• Housing Starts: Forecast to rise to 1.206 million annualized units in October.

The Week Ahead – Europe

• U.K. Industrial Production: Expected to rise 0.3% in September, pushing the yearly rate to 2%.
• France Industrial Production: Rose 0.9% m/m in September, with a 3.4% yearly growth rate.
• Italy Industrial Production: Continued growth, with real GDP expanding 0.4% in the third quarter of 2017, suggesting a strongest growth since 2010.
• Germany Trade Surplus: Narrowed to €21 billion in September, but still higher than 2016.
• Euro Strength: The strengthening euro poses a risk to Italy's short-term outlook due to weak credit growth.

Key Information

• Moody's Analytics provides the weekly market outlook, with contributors including John Lonski, Njundu Sanneh, Franklin Kim, Yuki Choi, and regional analysts.
• Regulatory Impact: The decline in liquidity for corporate bonds due to regulatory changes has raised market risk, potentially leading to wider spreads in times of stress.
• Inflation Expectations: One-year inflation expectations fell in October, but long-term inflation remains low.
• Economic Uncertainty: U.S. economic policy uncertainty remains elevated due to Washington D.C. dynamics, especially around tax cuts and regulatory changes.
• Market Models: A regression model suggests that the high-yield bond spread is expected to reach 420 bp, but the exclusion of the VIX index could push it to 490 bp.

Conclusion

While defaults are expected to decline in 2018, credit spreads may remain elevated due to liquidity concerns and regulatory shifts. Profits growth is a key factor in limiting spread widening, and market fundamentals do not yet support a significant correction in earnings-sensitive securities. However, geopolitical tensions, interest rate hikes, and consumer price pressures could still pose challenges to the market outlook.