20140210-穆迪服务-Argentine_Sovereign_Market_Risk_Measures_Rise_as_Fears_of_Economic_Crisis_Mount_16页_1mb

Moody's Sovereign Risk Report Summary

Core Content

This report from Moody's Capital Markets Research (CMR) provides an analysis of sovereign market risk measures across various countries, highlighting changes in expected default frequencies (EDF) and implied ratings based on credit default swap (CDS) spreads and bond market data. The report emphasizes how market signals reflect the risks and investment opportunities associated with sovereign entities, particularly focusing on Argentina's rising risk of economic crisis.

Main Points

• Argentina's Risk Profile:

  • Argentina's five-year Sovereign EDF™ increased sharply from 24.8% in January to 37.8% in February, indicating the highest probability of default among 84 sovereign entities in the dataset.
  • The largest increase occurred between January 23 and February 3, rising from 38.26% to 45.78%, reflecting a steep depreciation of the peso and worsening economic indicators.
  • Foreign exchange reserves dropped to $28.3 billion, down from a peak of $52.6 billion in 2011.
  • The cost of servicing debt increased, with bond yield spread reaching over 1,500 bp.
  • CDS spreads widened from 1,859 bp to 2,550 bp over the past month.
  • Argentina is the only country with a one-year EDF measure that exceeds its five-year annualized probability of default, suggesting short-term financial distress.

• EDF and Implied Ratings:

  • Sovereign EDF™ measures are forward-looking probabilities of default derived from CDS spreads, adjusted for loss-given default and market risk.
  • The term structure of EDF typically shows longer-term measures exceeding short-term ones, but in cases of financial distress, the opposite can occur.
  • Countries like Greece, Portugal, Ireland, and Cyprus previously showed higher one-year EDF measures than five-year ones before financial rescue.

Key Information

Asia-Pacific Region

Europe Region

Conclusion

The report underscores the increasing sovereign risk in Argentina, driven by economic instability, currency depreciation, and debt servicing challenges. It also highlights how market signals such as EDF and CDS spreads can indicate potential financial distress, and how these signals compare to historical ratings. While most countries in the Asia-Pacific and Europe regions show relatively stable or low risk levels, some like Cyprus, Greece, and Ukraine exhibit notable increases in risk measures, reflecting growing concerns about their economic sustainability.