20140915-穆迪服务-Venezuela_s_Sovereign_Credit_Risk_Measures_Reflect_Highest_Risk_of_Default_Globally_17页_1mb

MOODY'S ANALYTICS: MARKET SIGNALS SOVEREIGN RISK REPORT SUMMARY

Core Content

This report from Moody's Capital Markets Research (CMR) provides an analysis of sovereign credit risk measures, focusing on Venezuela and other countries in the Asia-Pacific and Europe regions. The key metrics used are Sovereign EDF™ (Expected Default Frequency), which represents the forward-looking probability of default derived from credit default swap (CDS) spreads. These measures are complemented by CDS implied ratings, bond implied ratings, and senior ratings to give a comprehensive view of credit risk and market sentiment.

Main Points

Venezuela's Sovereign Credit Risk

• Sovereign EDF measure has nearly doubled since the beginning of the year, reaching 4.2% as of September 12, 2014.
• This is the highest one-year probability of default among the 84 sovereign entities in the dataset, surpassing Puerto Rico (3.7%).
• The country faces severe economic challenges, including:
  • World's highest inflation rate (63.4% annually).
  • Strict currency controls and shortages of basic goods.
  • Foreign exchange reserves decreased by 7% from 2013 to 2014.
• CDS spreads have widened significantly, rising from 1,141bp to 1,449bp since the start of the year, nearing the levels seen in Argentina before its default.
• Bond-implied ratings and CDS-implied ratings show default risk as a material concern, with:
  • CDS-implied rating: C
  • Bond-implied rating: Ca
• Moody's Investors Service currently rates Venezuela Caa1 with a negative outlook, highlighting challenges like:
  • Stagnant oil production
  • Growing macroeconomic imbalances
  • Lack of transparency in public finances
  • Heavy dependence on the oil sector

Market Reaction

• Venezuela's Sovereign EDF measure spiked to 4.6% after the demotion of Rafael Ramirez, a key economic figure.
• Despite a slight improvement in the EDF measure after President Maduro reassured investors, credit risk remains the highest.
• Debt prices have declined, with bonds maturing in 2022 trading at 86 and yielding over 15.5%.
• The inverted PD curve (shorter-term EDF higher than longer-term) suggests increased near-term default risk.

Key Countries in Asia-Pacific and Europe

Asia-Pacific

Europe

Key Information

• Sovereign EDF is derived from CDS spreads, adjusted for loss-given default and market price of risk.
• Moody's Analytics and Moody's Investors Service are separate entities within Moody's Corporation.
• The report does not provide investment advisory services or products.
• Moody's Capital Markets Research complements fundamental analysis by offering market-based insights.
• The inverted PD curve in Venezuela indicates heightened near-term default risk.
• CDS-implied ratings and bond-implied ratings show a significant risk of default for Venezuela, with CDS-implied rating at C and bond-implied rating at Ca.
• The EDF measure is mapped to a rating using historical default rates, and Venezuela's 4.2% corresponds to a B3 rating, slightly above its Caa1 credit rating.