20160314-穆迪服务-ECB_Bazooka_Sparks_Decline_In_European_Sovereign_Credit_Risk_Cyprus_Steady_18页_588kb

Moody's Sovereign Risk Report Summary (14 March 2016)

Core Content

This report from Moody's Capital Markets Research provides an analysis of sovereign credit risk across various countries, focusing on the impact of the European Central Bank's (ECB) recent monetary policy measures. The ECB's actions include expanding bond purchases, cutting interest rates, and introducing negative rate loans to banks, which have had a positive effect on market-based credit risk metrics in Europe. The report also includes data on Asia-Pacific countries, highlighting their sovereign risk profiles and changes in risk measures.

Main Points

• ECB's Impact on European Sovereign Credit Risk:

  • The ECB introduced a series of radical measures to combat economic stagnation and deflation risks in Europe.
  • These measures include increasing monthly bond purchases from €60 billion to €80 billion, cutting benchmark interest rates to -0.40%, and reducing the refinancing rate to zero.
  • The ECB's actions led to an improvement in market-based credit risk measures, such as Sovereign EDF (Expected Default Frequency) and CDS-implied ratings.

• Improvement in Credit Risk Metrics:

  • Market-based measures of credit risk for European countries improved, indicating investor optimism about the effectiveness of ECB's stimulus.
  • Sovereign EDF metrics for peripheral European countries, such as Greece, improved significantly, though Greece still had the highest EDF among its European peers.
  • Bond spread-implied ratings remained steady, while CDS-implied ratings showed improvement.
  • The average bond spread-implied rating for European countries is A1, which is three notches above the average CDS-implied rating of Baa1 and two notches above the average Moody's agency rating of A3.

• Greece's Situation:

  • Greece's Sovereign EDF fell from 3.8% to 3.3% over the past week.
  • The decline was supported by an agreement between the EU and Turkey to manage migration and by progress on the next bailout payment.
  • Greece's unemployment rate is expected to remain high, and its national debt is projected to peak at 185% of GDP this year.

• Cyprus' Recovery:

  • Cyprus exited its €10 billion bailout on March 7 without requesting an extension.
  • The country reported economic growth of 1.6% year-on-year, declining public debt, and a budget surplus of 2.5% of GDP.
  • Cyprus' Sovereign EDF dropped significantly from 5.7% in 2012 to 0.4% currently, following similar exits by Ireland, Spain, and Portugal.

• Long-Term Economic Challenges:

  • Despite the ECB's measures, the negative trend in GDP, prices, and other economic fundamentals suggests that the improvement in credit risk may take time.
  • The long-term decline in oil prices also poses a challenge to economic recovery.

Key Information

• Market-Based Credit Risk Measures:

  • Sovereign EDF (5-Year): Improved in several European countries, indicating a lower probability of default.
  • CDS Implied-Rating: Improved, showing better credit risk perception.
  • Bond Spread Implied-Rating: Remained steady, suggesting no significant change in bond market risk.

• Asia-Pacific Overview:

  • Australia: Sovereign EDF (5-Year) slightly decreased, and CDS Implied-Rating remained stable.
  • China: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating remained at Baa2.
  • Hong Kong: Sovereign EDF (5-Year) decreased, and Senior Rating remained stable.
  • Indonesia: Sovereign EDF (5-Year) decreased, and CDS Implied-Rating improved.
  • Japan: Sovereign EDF (5-Year) decreased, and CDS Implied-Rating remained at A1.
  • Korea: Sovereign EDF (5-Year) decreased, and CDS Implied-Rating improved.
  • Malaysia: Sovereign EDF (5-Year) decreased, and Senior Rating remained stable.
  • Philippines: Sovereign EDF (5-Year) decreased, and CDS Implied-Rating improved.
  • Thailand: Sovereign EDF (5-Year) decreased, and CDS Implied-Rating improved.

• Other European Countries:

  • Austria: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating improved.
  • Belgium: Sovereign EDF (5-Year) decreased, and CDS Implied-Rating improved.
  • Bulgaria: Sovereign EDF (5-Year) decreased significantly, and CDS Implied-Rating improved.
  • Croatia: Sovereign EDF (5-Year) decreased, and CDS Implied-Rating improved.
  • Czech Republic: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating improved.
  • Denmark: Sovereign EDF (5-Year) decreased, and CDS Implied-Rating improved.
  • Estonia: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating improved.
  • Finland: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating improved.
  • France: Sovereign EDF (5-Year) decreased, and CDS Implied-Rating improved.
  • Germany: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating improved.
  • Hungary: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating improved.
  • Iceland: Sovereign EDF (5-Year) decreased significantly, and CDS Implied-Rating improved.
  • Ireland: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating improved.
  • Italy: Sovereign EDF (5-Year) decreased significantly, and CDS Implied-Rating improved.
  • Latvia: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating improved.
  • Lithuania: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating improved.
  • Netherlands: Sovereign EDF (5-Year) decreased slightly, and CDS Implied-Rating improved.
  • Norway: Sovereign EDF (5-Year) remained stable, and CDS Implied-Rating improved.
  • Poland: Sovereign EDF (5-Year) increased slightly, and CDS Implied-Rating improved.

Conclusion

The ECB's measures have led to a decline in European sovereign credit risk, with improved market-based metrics and a positive reaction in bond and equity markets. However, the long-term economic fundamentals remain challenging, and the full impact of these measures may take time to materialize. Cyprus and other countries have shown signs of recovery, indicating a potential path to financial stability.