20140804-穆迪服务-Argentina_s_Market-Based_Risk_Signals_Surged_Prior_to_Default_17页_1mb

Market-Based Risk Signals Report Summary

Core Content

This report discusses market-based risk signals for sovereign entities, particularly focusing on Argentina's recent default and its implications on credit risk measures. It also provides a comparative analysis of risk signals across various regions, including Asia-Pacific and Europe.

Main Points

Argentina's Default and Risk Signals

• Argentina defaulted on its government bonds on July 30, 2014, after failing to reach an agreement with holdout creditors.
• The country's one-year Sovereign EDF™ (Expected Default Frequency) spiked from 5.2% to 7.8% in one week, marking the third increase this year.
• Argentina's one-year EDF was the highest among 84 sovereign entities in the dataset, indicating severe credit risk.
• The average one-year EDF in Latin America was 1.15%, which was over ten times higher than Europe's 0.11%.
• CDS spread-implied and bond-implied ratings for Argentina remained elevated.
• Argentina's one-year EDF (7.8%) exceeded its five-year annualized probability of default, with the gap widening in the past week.
• Moody's Investors Service affirmed Argentina's Caa1 issuer rating and Caa2 for its foreign law bonds, while the Ca rating was assigned to the original defaulted bonds. The outlook was changed to negative.
• The CDS-implied rating for Argentina was B3, which is four notches below its Moody's credit rating.

Market Reaction and Implications

• Investors were concerned about the impact of the default, including higher inflation and pressure on the devalued peso.
• The default could damage the shrinking real economy and trigger credit insurance payments of $1 billion.
• Despite the default, JPMorgan Chase & Co. and other international banks were in negotiations to find a solution for resuming debt payments.

Other Regions and Countries

• The report includes market-based risk signals for multiple countries across Asia-Pacific and Europe, highlighting Sovereign EDF, CDS Implied-Rating, Bond Implied-Rating, and Senior Rating.
• Chile had the most stable Sovereign EDF, averaging 0.04% since the start of the year.
• CDS and bond implied ratings for other countries like Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Sri Lanka, Taiwan, Vietnam, Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, and Slovenia are detailed in the report.
• Some countries showed increased risk over the past year, while others showed stability or improvement in their risk indicators.

Key Information

• Sovereign EDF™ is a forward-looking probability of default derived from CDS spreads.
• The report compares market-based risk signals to Moody's credit ratings to assess the accuracy of market signals in reflecting credit risk and investment opportunities.
• Moody's Capital Markets Research (CMR) is part of Moody's Analytics, which operates independently from the rating agency (MIS) and does not provide investment advisory services.
• CDS and bond implied ratings are market-based measures that differ from Moody's senior ratings, which are fundamentally-based.

Summary of Key Countries

Asia-Pacific

• Australia: Sovereign EDF remained stable at 0.01%.
• China: Sovereign EDF increased slightly to 0.05%.
• Hong Kong: Sovereign EDF was stable at 0.02%.
• Indonesia: Sovereign EDF increased to 0.10%.
• Japan: Sovereign EDF was stable at 0.02%.
• Korea: Sovereign EDF increased to 0.03%.
• Malaysia: Sovereign EDF was stable at 0.04%.
• New Zealand: Sovereign EDF was stable at 0.01%.
• Philippines: Sovereign EDF was stable at 0.05%.
• Sri Lanka: Sovereign EDF decreased to 0.22%.
• Taiwan: Sovereign EDF was stable at 0.05%.
• Vietnam: Sovereign EDF decreased to 0.10%.

Europe

• Austria: Sovereign EDF was stable at 0.01%.
• Belgium: Sovereign EDF was stable at 0.02%.
• Bulgaria: Sovereign EDF decreased to 0.08%.
• Croatia: Sovereign EDF was stable at 0.15%.
• Cyprus: Sovereign EDF decreased to 0.27%.
• Denmark: Sovereign EDF was stable at 0.01%.
• Estonia: Sovereign EDF decreased to 0.03%.
• Finland: Sovereign EDF was stable at 0.01%.
• France: Sovereign EDF was stable at 0.02%.
• Germany: Sovereign EDF was stable at 0.01%.
• Greece: Sovereign EDF decreased to 0.42%.
• Hungary: Sovereign EDF decreased to 0.07%.
• Iceland: Sovereign EDF increased to 0.11%.
• Ireland: Sovereign EDF increased to 0.03%.
• Italy: Sovereign EDF increased to 0.07%.
• Latvia: Sovereign EDF decreased to 0.05%.
• Lithuania: Sovereign EDF decreased to 0.05%.
• Malta: Sovereign EDF was stable at 0.16%.
• Netherlands: Sovereign EDF was stable at 0.01%.
• Norway: Sovereign EDF was stable at 0.01%.
• Poland: Sovereign EDF decreased to 0.03%.
• Portugal: Sovereign EDF increased to 0.11%.
• Romania: Sovereign EDF decreased to 0.07%.
• Russia: Sovereign EDF increased to 0.21%.
• Slovakia: Sovereign EDF decreased to 0.02%.
• Slovenia: Sovereign EDF increased to 0.08%.

Conclusion

The report underscores the sharp increase in Argentina's credit risk as it defaulted on its debt, leading to market-based risk signals reflecting a high probability of default. It also highlights the differences between market-based and fundamental ratings, emphasizing the importance of monitoring market signals for credit risk assessment. Other regions and countries showed varied trends in risk indicators, with some experiencing increased risk and others stability or improvement.