20160414-穆迪服务-Corporate_Credit_Is_in_Late-Cycle_Mode_25页_502kb

Moody's Weekly Market Outlook Summary

Core Content

Moody's Weekly Market Outlook provides an analysis of current credit market conditions, focusing on corporate credit, economic indicators, and market data. The report highlights that corporate credit is in a late-cycle mode, characterized by increased defaults, narrowing profit margins, and a shift in the balance between downgrades and upgrades. It also includes a preview of upcoming economic reports and forecasts for the US, Europe, and Asia-Pacific regions.

Main Points

• Corporate Credit Trends

  • The speculative grade bond yield has been volatile, rising from 6.01% in late 2015 to 8.61% by the end of March 2016, then declining to 8.04% by April 13.
  • High-yield corporate credit has shown a rally, but it is vulnerable to reversal due to weak revenue growth and narrowing profit margins.
  • The high-yield default rate is expected to reach around 6.5% by Q3-2016, with the number of downgrades to "Caa3 or lower" rising sharply, especially in the oil & gas sector.
  • The correlation between downgrades to "Caa3 or lower" and high-yield default rates is very strong (0.96), indicating a close relationship between credit quality and default risk.

• M&A Impact on Credit Ratings

  • M&A activity has shifted from contributing more to upgrades than downgrades in earlier credit cycles to being a major driver of downgrades in the current late-cycle phase.
  • In the year-ended March 2016, M&A was linked to 70 upgrades and 122 downgrades, marking the highest number of M&A-linked downgrades since 2007.
  • This trend suggests that M&A is increasingly associated with financial stress, as companies are compelled to return capital to shareholders at the expense of credit quality.

• Equity Compensation and Credit Downgrades

  • Shareholder compensation downgrades have surpassed equity infusion upgrades, indicating that companies are struggling to meet profit expectations.
  • This suggests a more challenging environment for corporate credit, as firms are taking actions that may negatively impact their ratings.

Key Information

• US Economic Outlook

  • Industrial production is expected to decline slightly in March due to continued downward pressure in the mining sector.
  • The NAHB Housing Market Index is forecasted to rise to 59, indicating improved builder confidence.
  • Existing home sales are expected to increase sharply in March following a decline in February.
  • The Leading Economic Indicators Index is projected to rise by 0.4%, driven by stock price gains and improved consumer confidence.

• European Economic Outlook

  • The ECB's March policy package eased market jitters, but further rate cuts are unlikely.
  • The U.K. faces challenges due to Brexit uncertainty, with the unemployment rate expected to remain at 5.1% in March.
  • Greece's pension and taxation reforms are under discussion, with a potential agreement unlikely before late April.
  • The Euro Zone's external trade surplus is expected to widen to €20 billion in February, but global growth slowdowns and weak demand from China and the U.S. will limit export growth.

• Asia-Pacific Economic Outlook

  • While not detailed in this summary, the report includes forecasts for various economic indicators and market data.

Market Data Highlights

• Credit Spreads

  • Investment grade spreads are expected to remain around 150 bp by year-end 2016.
  • High yield spreads may approach 670 bp by year-end 2016.

• Issuance Trends

  • US$-denominated investment grade bond issuance is projected to increase by 3.5% to $1.372 trillion in 2016.
  • High yield bond issuance is expected to decline by 14.1% to $309 billion.

• Other Key Metrics

  • The ZEW Indicator of Economic Sentiment for Germany is expected to rise to 5.
  • The Markit manufacturing PMI for Germany rose to 50.7 in March, indicating a slight recovery in factory activity.

Ratings Round-Up

• The trend toward more defaults is a significant concern, with a sharp increase in downgrades to "Caa3 or lower" in Q1-2016.
• The correlation between downgrades and default rates is strong, reinforcing the view that the current credit cycle is in a late stage.

Conclusion

Moody's report underscores the risks associated with the late-cycle phase in corporate credit markets, including higher default rates, reduced bond issuance, and a shift in the impact of M&A on credit ratings. The outlook for the U.S., Europe, and Asia-Pacific regions remains mixed, with some indicators pointing to recovery and others highlighting ongoing challenges and uncertainties.