20140123-穆迪服务-Ireland_s_Market-Based_Risk_Measures_Stabilize_Following_Exit_from_Bailout_Program_16页_1mb

Moody's Market Signals Sovereign Risk Report Summary

Core Content

This report from Moody's Capital Markets Research (CMR) provides an analysis of market-based risk measures for various sovereign issuers, highlighting how credit and equity market signals reflect the financial health and risk profiles of these countries. The report contrasts the developments in Ireland with other peripheral European countries and includes data from the Asia-Pacific, Europe, and Latin America & Caribbean regions.

Main Points

• Ireland's Market-Based Risk Measures Stabilize:

  • Market-based probabilities of default for Irish government debt have remained almost unchanged since the country exited its international financial rescue program in mid-December.
  • The relative underperformance of Ireland's market-based credit metrics compared to other peripheral European countries is likely due to market participants having already priced in Ireland's favorable credit developments.
  • Ireland's five-year cumulative EDF measure dropped from 0.70% to 0.61% over the period, and its one-year EDF metric remained at 0.06%.
  • The yield on Ireland's new €3.75 billion ten-year debt issue was 3.543%, a significant improvement from 14% for ten-year yields and 23% for two-year yields two-and-a-half years ago.
  • Moody's Investors Service upgraded Ireland's government debt rating from Ba1 to Baa3, with a positive outlook, citing economic growth potential and on-schedule exit from rescue programs.

• IMF Projections:

  • The International Monetary Fund (IMF) predicts Ireland's debt-to-GDP ratio to remain at 123.3% this year but will decline to 109.8% by 2018.
  • Ireland's government budget deficit is expected to fall from 7.6% of GDP in 2013 to 1.7% by 2018, the largest drop among the original GIIPS countries.

• Other European Countries:

  • Portugal: Five-year EDF measure declined significantly from 3.21% in mid-December to 1.94% this past week.
  • Italy, Spain, and Portugal showed significant improvements in their CDS-implied EDF measures, contrasting with Ireland's stable metrics.
  • Cyprus: Experienced a notable decline in CDS-implied EDF, from 3.72% to 1.22%.
  • Greece: CDS-implied EDF dropped from 1.13% to 0.76%, but the country's senior rating remained at Caa3.

• Asia-Pacific Overview:

  • Australia: CDS-implied EDF remained stable, while the CDS-implied rating dropped from Aa3 to A1.
  • China: CDS-implied EDF increased slightly, and the CDS-implied rating dropped from A1 to Baa2.
  • Hong Kong: CDS-implied EDF remained stable, and the CDS-implied rating dropped from Aa2 to A2.
  • Indonesia: CDS-implied EDF increased by 10 bps, and the CDS-implied rating dropped from Baa2 to Ba2.
  • Japan: CDS-implied EDF dropped by 9 bps, and the CDS-implied rating improved from A3 to A2.
  • Korea: CDS-implied EDF remained stable, while the CDS-implied rating dropped from A2 to Baa1.
  • Malaysia: CDS-implied EDF increased by 3 bps, and the CDS-implied rating dropped from A2 to Baa3.
  • New Zealand: CDS-implied EDF remained stable, and the CDS-implied rating dropped from Aa3 to A1.
  • Philippines: CDS-implied EDF increased by 4 bps, and the CDS-implied rating dropped from Baa2 to Ba2.
  • Singapore: Senior rating remained at Aaa, while CDS-implied EDF and ratings were stable.
  • Sri Lanka: CDS-implied EDF increased by 7 bps, and the CDS-implied rating dropped from B2 to B3.
  • Taiwan: CDS-implied EDF remained stable, and the CDS-implied rating dropped from A3 to Baa2.
  • Thailand: CDS-implied EDF increased by 4 bps, and the CDS-implied rating dropped from B2 to Ba1.
  • Vietnam: CDS-implied EDF increased by 8 bps, and the CDS-implied rating dropped from Baa3 to Ba3.

• Europe Overview:

  • Austria: CDS-implied EDF and ratings remained stable.
  • Belgium: CDS-implied EDF remained stable, while the CDS-implied rating improved from A3 to A1.
  • Bulgaria: CDS-implied EDF and ratings remained stable.
  • Croatia: CDS-implied EDF dropped by 9 bps, and the CDS-implied rating improved from Ba2 to B2.
  • Denmark: CDS-implied EDF and ratings remained stable.
  • Estonia: CDS-implied EDF dropped by 3 bps, and the CDS-implied rating improved from Baa3 to Baa2.
  • Finland: CDS-implied EDF and ratings remained stable.
  • France: CDS-implied EDF dropped by 6 bps, and the CDS-implied rating improved from A3 to A2.
  • Germany: CDS-implied EDF dropped by 3 bps, and the CDS-implied rating improved from Aa2 to Aaa.
  • Iceland: CDS-implied EDF dropped by 7 bps, and the CDS-implied rating improved from Ba1 to Baa3.
  • Latvia: CDS-implied EDF and ratings remained stable.
  • Lithuania: CDS-implied EDF and ratings remained stable.
  • Malta: CDS-implied EDF dropped by 19 bps, and the CDS-implied rating improved from B1 to Ba2.
  • Netherlands: CDS-implied EDF and ratings remained stable.
  • Norway: CDS-implied EDF and ratings remained stable.
  • Poland: CDS-implied EDF and ratings remained stable.
  • Romania: CDS-implied EDF and ratings remained stable.
  • Russia: CDS-implied EDF and ratings remained stable.
  • Serbia: CDS-implied EDF and ratings remained stable.
  • Slovakia: CDS-implied EDF dropped by 4 bps, and the CDS-implied rating improved from Baa2 to Baa1.
  • Slovenia: CDS-implied EDF dropped by 10 bps, and the CDS-implied rating improved from Ba1 to Baa3.
  • Spain: CDS-implied EDF dropped by 33 bps, and the CDS-implied rating improved from Ba2 to Baa3.
  • Sweden: CDS-implied EDF and ratings remained stable.
  • Switzerland: CDS-implied EDF dropped by 2 bps, and the CDS-implied rating improved from Aa2 to Aa1.
  • United Kingdom: CDS-implied EDF dropped by 3 bps, and the CDS-implied rating improved from Aa2 to Aa1.

Key Information

• EDF (Expected Default Frequency): A market-based measure of the probability of default, derived from credit default swap spreads and adjusted for loss-given default and the market price of risk.
• CDS-implied ratings: Ratings derived from CDS spreads, reflecting the market's view of credit risk.
• Bond-implied ratings: Ratings derived from bond yields, indicating the market's assessment of the bond's creditworthiness.
• Senior ratings: Moody's Investors Service ratings, which are fundamental assessments of credit risk.

Summary

The report underscores that Ireland's market-based risk measures have stabilized since exiting its international financial rescue program, with the EDF and bond yields showing marked improvement. In contrast, other peripheral European countries such as Portugal, Italy, and Spain have seen significant improvements in their credit metrics. The IMF projects that Ireland will have one of the lowest debt-to-GDP ratios among the original GIIPS countries by 2018. Across the Asia-Pacific and Europe regions, there were mixed trends, with some countries showing stability and others demonstrating improvements in their credit profiles. The report serves as a comprehensive analysis of market signals and their implications for sovereign risk and investment opportunities.