FED cautious moody´s

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WEEKLYMARKET OUTLOOK

MARCH 31, 2016CAPITAL MARKETS RESE

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Fed Caution Reflects Elevated Credit Risk

Credit Markets Review and Outlook by John LonskiFed Caution Reflects Elevated Credit Risk.

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The Week Ahead We preview economic reports and forecasts from the US, UK/Europe, and Asia/Pacific regio

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The Long View Check our chart here for forecastsummaries of key credit marketmetrics. Full updated stories, “TheUS$-denominated corporate bondissuance of 2016’s second quarteris expected to grow by 5.5%annually for investment grade andto drop by -11.4% for high yield,”begin on page 15.

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Ratings Round-Up by Njundu SannehWorrisome Default Trends.

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Market Data Credit spreads, CDS movers, issuance.

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Moody’s Capital Markets Research recent publications Links to commentaries on: Hungary, rally, builders, Brazil, BNPP, profits, OXY, Valeant, USSTANLN,ECB, Asia, risk rise, Barclays.

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CreditSpreads

Investment Grade: Year-end 2016 spread to resemble itsrecent 156 bp.High Yield: After recent spread of 712 bp, it mayapproximate 680 bp by year-end 2016.

Defaults US HY default rate: after February 2016’s 3.6%, MoodyCredit Policy Group forecasts 5.5% by January 2017.

Issuance In 2015, US$-denominated investment grade (IG) bondofferings advanced by 17.5% to $1.297 trillion, whileUS$-priced high yield bond issuance sank by -19.5% to$289 billion. For 2016, US$-denominated IG bondissuance may increase by 8.1% to $1.434 trillion, whileUS$-priced high yield bond issuance may sink by -13.6%to $310 billion.

Click here for Moody’s Credit Outlook , our sister publication containing Moody’s rating agency analysiof recent news events, summaries of recent rating changes, and summaries of recent research.

Moody’s Capital Markets Research, Inc.

Weekly Market Outlook Contributors:David W. Munves, [email protected] John Lonski1.212.553.7144 [email protected]

Ben [email protected] [email protected] Choi1.212.553.0906 [email protected] [email protected] [email protected] (Peter) Li

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Moody's Analytics/Europe: Tomas Holinka+420 ( 221) [email protected]

Moody's Analytics/Asia-Pacific: Jack Chambers+61 (2) 9270-8111 [email protected] Dabbs+61 (2) [email protected]

EditorDana [email protected]

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CAPITAL MARKETS RESEARC

2 MARCH 31, 2016 CAPITAL MARKETS RESEARCH INC. / MARKET OUTLOOK / MOODYS.CO

Credit Markets Review and Outlook

Credit Markets Review and OutlookBy John Lonski, Chief Economist, Moody’s Capital Markets Research, Inc.

Fed Caution Reflects Elevated Credit RiskThe high yield market needs all the support it can get, given how downgrades now well exceed upgradewith and excluding oil and gas related revisions. Thus, high yield credit responded positively to Fed chYellen’s March 29 speech before the Economics Club of New York that reduced the perceived likelihoohikes over the near term. However, the Fed’s cautious approach to a normalization of policy stems fromabove-average economic risks that may continue to menace the outlook for speculative grade debt.

Markets realize that the Fed is unlikely to more vigorously stimulate expenditures. Rather, for now, theintent is to avoid worsening conditions by hiking rates.

A still extraordinarily low fed funds rate strongly suggests that the Fed may have difficulty spurringexpenditures through its traditional policy instrument. With that in mind, Dr. Yellen indicated that if threturn of a “zero percent” lower-boundary for the federal funds rate fails to adequately enliven businessactivity, the Fed may implement another round of quantitative easing and not resort to a negative intererate policy. Thus, though the 10-year Treasury yield may eventually climb higher by 25 to 50 bp from irecent 1.8%, the 10-year Treasury yield is likely to set a new multi-decade low following the next reces

Downgrade portion of high yield rating changes falls short of ringing the recession alarmAccording to a methodology that has been employed since 1986 and has done a fairly good job of explathe high yield bond spread, preliminary results for Q1-2016 show the downgrade share of US high yieldrating revisions improving from a dismal 82% to a still weak 72% after excluding high yield rating chanlinked to the difficulties of oil and gas. Over a slightly longer span, downgrades’ share of high yield ratchanges excluding oil and gas recently soared from the 47% of the six-months-ended September 2015 tprospective 71% of the six-months-ended March 2016.

Never before has this measure worsened so abruptly from one six-month span to the next. For purposescomparison, the six-month version of this high yield downgrade ratio previously climbed up to roughly Q2-2008, Q1-2000, Q4-1998, Q2-1989, Q4-1987, and Q3-1986. The good news is that in only three ofthose six earlier episodes were recessions either present or less than 12 months away.

In addition, downgrades’ share of all US high yield rating revisions over a yearlong span weighs agains

nearness of a recession. During the 12-months-ended March 2016, downgrades supplied 68% of the numof US high-yield credit rating revisions, which was well above the ratio’s 53% median of previous obsebelonging to an economic recovery. Following earlier cycle bottoms, downgrades first approached 68%moving yearlong sum of high-yield rating changes in the spring of 2008, the spring of 1999, the summe1989, and the winter of 1988. A recession was present only for the spring of 2008. And, only for the suof 1989 was a recession less than 12 months away. The yearlong ratio of downgrades to all high yield rchanges may need to reach 75% in order to justify a recession watch. (Figure 1.)

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Recessions are shadedDowngrades as % of US High-Yield Rating Changes: moving yearlong ratioDowngrades as % of US High-Yield Rating Changes ex Oil & Gas post Q3-2014: moving yearlong ratio

Figure 1: High-Yield Downgrade Ratio Turns Higher Both With and Without Oil & Gas Related Revisions


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Credit Markets Review and OutlookHigh yield rating changes ex oil & gas show limited scope for spread narrowingFrom a historical perspective, the latest relative frequency of high yield downgrades excluding oil and gbeen associated with a 650 bp midpoint for the high yield bond spread, which is somewhat thinner than actual yield spread of 712 bp. However, the adjusted R-square of 0.38 of the latter approach is significaless than the 0.63 generated by a model that explains the high yield bond spread in terms of the moving month ratio of net high yield downgrades to the number of high yield companies. The latter approachcurrently generates an 800 bp midpoint for the high yield bond spread. (Figure 2.)

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Figure 2: A Wider than 750 bp High-Yield Bond Spread Is Statistically Consistent with theRecent Recent Relative Frequency of Net High-Yield Downgrades

Recession risk will swell if profits shrink for a second straight year in 2016Returning to Janet Yellen’s March 29 speech before the Economic Club of New York, the Fed chair menthat economic and financial conditions have deteriorated since the Fed rate hike of December 16, 2015,wherein the downward revision of corporate earnings expectations was specifically cited. Comparativeprofits growth will limit the upside for improvements in corporate credit quality. Moreover, the avoidan

recurring contraction of profits would go far toward preserving adequate systemic liquidity.In view of 2015’s -3.1% annual decline by pretax profits from current production, the containment of rerisks during the next 18 months may require a renewed expansion by profits in 2016. Since 1946, each of two consecutive annual contractions by profits was associated with a recession.

Before oil prices plunged, pretax profits from current production rose by merely 2.0% in 2013 and 1.7%2014 following the metric’s 12.7% average annualized advance of the three-years-ended 2012. Calenda-3.1% drop by pretax operating profits occurred more than five years into the current business cycle uptSince 1960, previous calendar-year declines by profits (and the accompanying percent drop) amid a mateconomic recovery occurred in 2007 (-7.1%), 1998 (-7.1%), 1989 (-0.2%), 1986 (-8.5%), 1969 (-3.3%),1967 (-2.4%). The setbacks of 2007, 1989, and 1969 immediately preceded recessions. Thus, like the npronounced excess of credit rating downgrades over upgrades, the shrinkage of profits hardly constitutesurefire warning of an impending recession.

As inferred from the GDP accounts, 2015’s -3.1% shrinkage of profits partly stems from the more prondeceleration by US corporate gross value added — from 2014’s 4.6% increase to 2015’s 3.4% rise — wcompared to the milder slowing by the annual growth rate of employee compensation — from 2014’s 52015’s 4.9%. (US corporate gross value added serves as a proxy for net corporate revenues.)

Calendar year 2015’s 3.4% annual rise by the net revenue proxy was the slowest since 2013’s 3.3%. Hoprofits managed to edge higher in 2013 partly because of the slower 3.1% rise by employee compensati

For the 31 calendar years beginning in 1985 and ending in 2015, the correlation between (i) the annual pchange of profits from current production and (ii) the percentage point difference between the annual pechanges of corporate gross value added less employee compensation is a relatively strong 0.87. Therefounless gross value added accelerates, the risk of another annual decline by profits increases, especially ghow a firmer labor market portends faster growth by employee compensation.


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Credit Markets Review and OutlookHigh yield spread reflects current recovery’s limp performanceOn balance, the high yield bond spread has been wider during the current upturn compared to spreads frprevious recoveries. The atypically wide high yield spread partly follows from how the current recoverbeen distinguished by the slowest economic growth of any upturn since the 1940s. For the current recothe high yield spread’s moving three-year average bottomed at the 453 bp of the span-ended August 201which was well above its previous moving-three-year average bottoms of 339 bp for the span-ended Juland 360 bp for the span-ended July 1998. (Figure 3.)

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Recessions are shaded High Yield Bond Spread: moving 36-month average in bp

Figure 3: High-Yield Bond Spread's Moving Three-Year Average Never Approached the Lows of RecentRecove Recoveries and May Have Bottomed for the Current Upturn

The high yield spread also seems to doubt the accuracy of a widely followed macro metric. For exampldespite the very low 4.9% average unemployment rate of the three-months-ended February 2016, the hi yield bond spread averaged a very wide 771 bp. By contrast, when the jobless rate’s three-month averaeased to 4.9% during previous upturns, the accompanying high yield spread averaged 375 bp in Januaryand 328 bp in July 1997. Accordingly, the high-yield bond spread implicitly recognizes that theunemployment rate overstates the health of the US labor market. In fact, as derived from the ratio of pato the working-age population, the “real” jobless rate may be closer to 7% after adjusting for the downw

bias now imparted to the unemployment rate by the large number of labor force dropouts.


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The Week Ahead



The Week Ahead – US, Europe, Asia-Pacific

THE USBy John Lonski and Ben Garber Moody’s Capital Markets Research GroupEstimates are consensus views. Release times are US Eastern Standard Time

FRIDAY, APRIL 1

Employment Report – MarchTime: 8:30 amForecast: 205,000 nonfarm payrolls, 4.9% unemployment rateDespite growing in excess of 2.5 million jobs year-over-year for 21 consecutive months, nonfarm payrtrends have not translated into substantial wage gains. However, with the broader measure ofunderemployment falling to the eight-year low of 9.7% in February, labor markets appear to be tightenservice of faster income growth. This past progress has kept the Federal Reserve poised to continue topolicy rates, as hotter economic conditions have recently translated into quickening core inflation grow

ISM Manufacturing Index – MarchTime: 10:00 amForecast: 50.8The ISM Manufacturing Index can tiptoe its way into expansionary territory in March for the first timemonths. Both the production and new orders components of the index displayed growth in January andFebruary, setting the stage for a broader turnaround in manufacturing. Within the industrial productionfigures, manufacturing sector output avoided the declines of the utilities and mining sectors, pointing tsome strength outside of commodities.

Construction Spending – FebruaryTime: 10:00 amForecast: 0.1%Construction spending can inch higher in February after expanding at the eight-month high rate in Janu

Residential building permits rose 11% year-over-year in the quarter ending February, indicating lastingin that sector. And the value of private nonresidential activity rose 9% yearly in the three months endi January, as the rise in construction can rely on a broad base of activity.

University of Michigan Consumer Sentiment – March FinalTime: 10:00 amForecast: 90.5The final reading on March sentiment in the Michigan survey can slightly improve on the five-month linitial value. The beginning of a run-up in gas prices can dampen the potential recovery in consumersentiment. Yet if higher fuel costs are more than surpassed by quicker wage growth, sentiment can begmove toward previous cycle highs.

Vehicle Sales – March

Forecast: 17.5 millionSolid incentives and ample credit can lift March vehicle sales to the highest total in four months. Salesthe last quarterly period were up 5% year-over-year, an admirable pace for an economic recovery of alseven years in length. Low fuel prices helped light trucks take a near record 59% of all vehicle sales inFebruary, a trend that may ease if gasoline prices rise substantially further.

MONDAY, APRIL 4

Factory Orders – FebruaryTime: 10:00 amForecast: -1.9%


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A sharp February setback for durable goods orders is projected to lead a decline in factory orders for ththird time in four months. Relief from recent market volatility and some softness in the dollar can helparrest the setbacks in industrial demand. Orders are pushing toward growth over the long-term, as the year-over-year decline in core durable goods orders for the three months ending February is the shallowsuch decline in 11 months.

TUESDAY, APRIL 5

Trade Balance – FebruaryTime: 10:00 amForecast: -$45.0 billionThe advance report on trade in goods hints of limited change in the overall trade deficit in February. Yearly figures demonstrated simultaneous growth in imports and exports of goods for the first time in 11months, a positive sign for global economic activity. Reversing the extended drop in exports lifts theearnings of US firms, which can moderate the broad decline in corporate credit quality.

ISM Non-Manufacturing Index – MarchTime: 10:00 amForecast: 54.2The March ISM Non-Manufacturing Index is projected to rise to the highest level in three months, reflthe continued uplift in service sector hiring. Over the past year, private service sector hiring has accoufor 93% of overall nonfarm payroll job growth, as demand in this segment trends upwards. The new eorders measure from this service sector report rose 8 points to 53.5 in February, showing the largestmonthly uptick in foreign demand for US services in six years.

WEDNESDAY, APRIL 6

FOMC Meeting MinutesTime: 2:00 pmMinutes from the March FOMC meeting will outline why participants are taking are more cautious apptoward rate hikes than they had anticipated late last year. In recent weeks, a strong rebound in financiamarkets removes one obstacle to further tightening policy. Yet the Fed is particularly inclined to moveslowly on removing accommodation so that they do not put too much upward pressure on the dollar.


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Time: 8:00 a.m. GMTForecast: 11.6% unemployedItaly’s unemployment rate likely rose to 11.6% in February from 11.5% in January because of the sloweconomy. Households expect unemployment will increase in coming months, according to the consumconfidence survey. The slowdown in China and the contraction in Russia remain concerns. But enactedlabor market reforms, which should ease firing restrictions and offer tax breaks for firms that hire newworkers on permanent contracts, could reduce unemployment in 2016.

Russian Federation – Reserve Fund – AprilTime: 9:00 a.m. GMTForecast: RUB3.5 trillionRussia's reserve fund will likely stand at RUB3.5 trillion as of the beginning of April. The governmentcontinues to rely on the fund to cover the shortfall in financing, because of persistently large operationdeficits during recent months. For this reason, the reserve fund will likely decline in hard currency termin coming months as the deteriorating economy narrows the fiscal space and muted oil prices diminishgovernment revenues from natural resource extraction. Unless an unexpected shock forces oil prices toskyrocket, a planned 10% reduction in 2016 budget expenditures will do little to prevent the fund'sdepletion in a year's time.

United Kingdom – Moody's Analytics Debt Service Ratio – 2015Q4Time: 10:00 a.m. GMTForecast: 12.8%The U.K. household debt service burden—the share of income that households must spend to repaydebt—likely decreased slightly in the fourth quarter of 2015 as weak inflation, the tight labor market, arecord low borrowing costs should have supported the capacity of households to meet their debt servicburden. Nevertheless, wage growth remained lackluster, which should have put some upward pressure the debt service burden.

Russian Federation – GDP – 2015Q4Time: 12:30 p.m. GMTForecast: -4.2%Real output in Russia likely declined 4.2% y/y in the final quarter of 2015. The major drag was privateconsumption, as evidenced by a 13.4% decline in retail sales in the three months to December.Investment likely continued to slide, but at a milder pace compared with a year earlier. Governmentconsumption in real terms has remained relatively stable, as the growth in government expenditures innominal terms has been on par with inflation.

MONDAY, APRIL 4

Italy – Government Finance – 2015Q4Time: 9:00 a.m. BSTForecast: -€7.6 billionThe Italian government's fiscal deficit likely narrowed in the three months to December from theprevious quarter and compared with a year earlier. For the whole year, the budget deficit narrowed to2.6% of GDP from 3% in 2014 thanks to the expanding economy, and it should fall this year to 2.4% o

GDP. Although favorable financing conditions in the debt market should keep interest payments low,reducing the deficit, Italy may miss the year-end target because of the weakening economy. This maytrigger action from the European Commission, as breaking EU budget rules may warrant additionalspending cuts.

Euro Zone – Producer Price Index – FebruaryTime: 10:00 a.m. BSTForecast: -2.4%Euro zone producer prices likely declined 2.4% y/y in February, following a 2.9% drop in the previousmonth. Still, we expect month-on-month inflation to remain close to -0.2%. The yearly decline is driveby low energy prices. Nevertheless, producer price inflation is predicted to pick up slightly in comingmonths, in part because of the base effect, ongoing recovery, and depreciation of the euro during the


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past 12 months. Yet producer price inflation will remain muted, as oil prices will pick up only slowly aprices of manufactured goods will remain low.

Euro Zone – Unemployment – FebruaryTime: 10:00 a.m. BSTForecast: 10.2%The euro zone’s unemployment rate likely ticked down to 10.2% in February, following drops in theprevious months. The region's real GDP growth stayed at 0.3% q/q in the three months to December

from the previous quarter, putting it 1.5% higher than in the same quarter of 2014. Nevertheless,headline unemployment and youth unemployment rates are still elevated and are especially high inperiphery countries such as Spain, Greece and Cyprus. The downward trend in the jobless rate shouldcontinue in coming months, reflecting improving economic conditions around the monetary bloc, labomarket reforms, and a strengthening industrial base in Spain, Portugal and Ireland. The greatest risk torecovery comes from uncertainty surrounding the political situation in Greece, immigration crisis, furthslowdown in China, and tensions between Russia and Ukraine.

Germany – Vehicle Registration – MarchTime: 11:00 a.m. BSTForecast: 5%Vehicle registrations in Germany likely continued to gain in March, but the rate of increase probablysoftened to around 5% y/y from 12.4% in the previous month. Consumer spending should be relativelyrobust in coming months. The Markit retail PMI rebounded in February to 52.4 from a 16-month low o49.5 in January, pointing to renewed increase in retail sales in coming months, which should alsotranslate into higher car registrations.

TUESDAY, APRIL 5

Germany – Manufacturing Turnover and Orders Received – FebruaryTime: 9:00 a.m. BSTForecast: -0.5%German manufacturing orders likely continued to contract in month-ago terms in February, retreating b0.5%. However, they still increased in year-ago terms at an accelerated rate. According to the Markitmanufacturing PMI for February, new orders grew for the 15th consecutive month, though the rate ofincrease decelerated to a seven-month low. New export orders advanced over the month but also at asignificantly softer rate. Still, German business sentiment has rebounded somewhat in March followingweak first two months of the year, which could translate into higher orders in coming months.

Euro Zone – Retail Trade – FebruaryTime: 10:00 a.m. BSTForecast: 0.2%Euro zone retail sales likely added 0.2% m/m in February, after gaining 0.4% in the previous month. TMarkit retail PMI for the euro zone was at 50.1 in February, up from January's 48.9, mainly reflectingincreased sales in Germany. Most retailers hit their February targets. Still, lower consumer confidence,persistent and high unemployment and underemployment, migration flows, geopolitical risks, anduncertainty about China continue to be the main dampeners on retail sentiment.

Russian Federation – Consumer Price Index – MarchTime: 1:40 p.m. BSTForecast: 0.6%Monthly CPI inflation in Russia likely decelerated further in March. The ruble has been appreciating siFebruary, alleviating the short-term upward pressures on inflation. Nevertheless, because of asymmetriexchange rate pass-through, a steep decline in the inflation rate is not expected either. On the demandside, the same downside factors persist, with both retail sales and consumer confidence still muted.

WEDNESDAY, APRIL 6

Germany – Industrial Production – February


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Time: 9:00 a.m. BSTForecast: -0.8%German industrial production likely contracted somewhat in February following a strong start to the yeWe expect production fell 0.8% m/m, but still rose 1.5% y/y. Germany's Markit manufacturing PMI forFebruary decreased to a 15-month low of 50.5, signaling only marginal improvement in businessconditions, while the flash March PMI slid further to 50.4 in March. With the uncertain outlook,production will likely be muted in the coming months.

THURSDAY, APRIL 7

France – Trade balance – FebruaryTime: 8:00 a.m. BSTForecast: -€3.9 billionFrance’s foreign trade deficit likely expanded, seasonally adjusted, in February because of strongerimports. We expect export activity was broadly unchanged. Despite recent improvements, exportsremain below their potential, and are expected to improve only slowly as long as France struggles withrelatively low competitiveness and external demand from other euro zone countries picks up at a craw

Spain – Industrial Production – FebruaryTime: 8:05 a.m. BSTForecast: 2.9%Spain’s industrial production likely slowed to 2.9% in calendar-adjusted terms in February amid subdubusiness survey data. The manufacturing PMI indicated that although growth in factory activity remainsolid, it slowed in February from January’s exceptional performance. Business sentiment stayed at -2, tsame as in January. Production likely eased in all subsectors, but energy goods were once again the madrag. Nevertheless, the economy continues to outperform most of its euro zone peers and, according tofinal estimates, expanded 3.2% in 2015, the fastest rate of growth since 2007. Robust domestic demandand easing financial conditions should maintain the growth momentum in the medium term, but theglobal slowdown combined with internal political instability is weighing on confidence and thus growt

United Kingdom – Halifax Housing Price Index – MarchTime: 8:30 a.m. BSTForecast: 9.3%The Halifax house price index for the U.K. likely rose 9.3% y/y in the three months to March afterincreasing 9.7% in the three months to February. The chronic shortage of existing homes, lack of newsupply, low interest rates, and expected tax hike in April have been pushing residential property priceshigher, particularly in London and the South-East, and the trend is likely to continue in the near term.

FRIDAY, APRIL 8

France – Industrial Production – FebruaryTime: 7:45 a.m. BSTForecast: 0.2% m/mFrance’s industrial production likely increased in February on a month- and year-ago basis. Demand foFrench industrial products is firming but remains under pressure from the slow recovery, tight credit, asluggish recovery in France’s key euro zone trading partners. The uncertainty around developments inGreece, China, and the immigration crisis is dampening demand. Still, the February manufacturing PMfor France came in at 50.2, higher than the 50 in the previous month but slightly below the preliminaryestimates of 50.3. Manufacturing output fell for the first time in six months amid a further drop in neworders, while backlogs of work rose for the third straight month.

Germany – Foreign Trade – FebruaryTime: 8:00 a.m. BSTForecast: €18.5 billionGeopolitical tensions and the slowdown in emerging markets likely weighed on Germany's foreign tradsurplus in February. We expect the surplus narrowed to €18.5 billion from €18.9 billion in January and


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from €20 billion in February 2015. Despite the relatively weak euro, foreign demand for German goodwill likely be subdued in coming months because of the buildup of unfavorable external conditions.

France – Fiscal balance – FebruaryTime: 8:00 a.m. BSTForecast: -€21.2 billionWe expect France’s cumulated fiscal deficit reached €21.2 billion in February. The budget deficit in Frcontinues to fall year on year, driven by drops in revenues. Improvement is visible in spending, which

declined at a somewhat slower pace than the government declared at the beginning of 2015. Franceshould approach a deficit of 3.6% of GDP this year and 3.1% in 2017. The structural deficit is estimateto decrease by a cumulative 1.6% of GDP in 2016 and 2017 and should improve beyond then, thoughthere is no guarantee.

United Kingdom – Industrial Production – FebruaryTime: 9:30 a.m. BSTForecast: 0.1%U.K. industrial production recovered somewhat in January from unexpected contractions at the end oflast year. The February purchasing managers’ index showed the slowest rate of expansion in almost thr years. The slowdown in emerging markets and softer global growth outlook are weighing on exportdemand. Meanwhile, uncertainty surrounding the June referendum on U.K. membership in the EuropeaUnion likely dented confidence at home and added to the pound's volatility. Latest national accountsdata showed declining investment and falling exports in the second half of 2015. We expect Februaryindustrial production increased marginally, by 0.1% m/m, but remained unchanged in yearly terms.

United Kingdom – Foreign Trade – FebruaryTime: 9:30 a.m. BSTForecast: -£10 billionThe U.K. trade deficit likely narrowed in February to £10 billion from £10.3 billion in January. The madriver was probably a fall in imports, while exports remained steady. Although imports should havebenefited from oil prices rallying 4.8% in February from January, they likely remained subdued as retasales and investment remained under pressure. Uncertainties ahead of June’s EU membership referenduare leading companies and households to postpone major decisions, and domestic demand is expectedto suffer in the first half of the year. Exports likely gained, because the pound weakened against the doand the euro over the month, boosting the cost competitiveness of British exports in the U.S and eurozone. This trend was partially offset by the global slowdown, resulting in depressed external demand.

Russian Federation – Foreign Trade – FebruaryTime: 2:00 p.m. BSTForecast: US$12 billionRussia's trade balance likely benefited from increased production and modestly rebounding oil prices iFebruary. However, low oil prices and geopolitical tensions will hurt Russia's trade balance in theforeseeable future. Even so, the trade balance will remain in surplus as the fall in exports is offset bydecreased imports because of largely depressed domestic demand and Russia's reciprocal sanctionsagainst the West and Turkey.


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The Week Ahead



ASIA-PACIFICBy Jack Chambers and the Asia-Pacific Staff of Moody’s AnalyticsRelease times are Greenwich Mean Time

Australian consumer activity is set to improve, while pessimism mounts in JapanAustralian data are likely to show an economy of two halves. February’s data will likely show the tradedeficit widening as a result of falling exports. In contrast, the domestic economy is performing well an

expect retail sales for the same month to show an uptick in consumer activity. The Reserve Bank of Auhas been supporting the domestic economy with accommodative monetary policy. We expect it to mainthis easing bias but leave rates unchanged when it meets on Tuesday.

Other data are expected to show continued weakness in the region. Japanese consumer confidence likeeven deeper into pessimistic territory. Trade data for February are expected to show that soft globalconditions are weighing on Indian and Malaysian exports.

FRIDAY, APRIL 1

South Korea – Consumer Price Index – March

Time: 10:00 a.m. AEDT (Thursday 11:00 p.m. GMT)Forecast: 1.3%Korea’s inflation environment likely remained relatively steady in March, with headline CPI ticking up y/y for the second month in a row. Though an improvement on the weak growth seen through most of2015, the headline figure remains well below the 2% average in previous years. Low global energy priremain the biggest drag on price growth, while subdued domestic demand is also hindering animprovement. Despite this weakness, the Bank of Korea is unlikely to provide further monetary easingstage.

Japan – Tankan Survey – 2016Q1Time: 10:50 a.m. AEDT (Thursday 11:50 p.m. GMT)Forecast: 9Sentiment across large manufacturers likely dropped to 9 in the March quarter, down from 12 in theprevious quarter. The yen has risen, and deflation is nearly back. Businesses are unlikely to view theseconditions as favorable. We will likely see year-ahead price expectations also fall. Overall, weaker extconditions, coupled with slower domestic growth, will likely keep sentiment muted.

South Korea – Foreign Trade – MarchTime: 11:00 a.m. AEDT (Thursday 12:00 a.m. GMT)Forecast: US$8.8 billionKorea’s monthly trade surplus likely widened to US$8.8 billion in March from US$7.4 billion in FebruThough exports continue to come under pressure from weak global demand, this was likely outweighedrop in imports as the weak currency and low global commodity prices keep a lid on the bill. The slowin China remains the biggest drag on shipments, while auto and tech exporters struggle with increasedcompetition from Japan and the mainland. Stronger global growth in the latter half of 2016 should bootrade down the track.

MONDAY, APRIL 4

Australia – Retail Sales – FebruaryTime: 11:30 a.m. AEST (1:30 a.m. GMT)Forecast: 0.5%Australian retail trade is expected to have strengthened in February, growing 0.5% m/m after a 0.3% g January. Accommodative monetary policy and rising employment support domestic demand, while finmarket volatility likely kept a lid on the gains. Household spending should remain a bright spot as theeconomy transitions away from mining-driven growth.


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TUESDAY, APRIL 5

Australia – Foreign Trade – FebruaryTime: 11:30 a.m. AEST (1:30 a.m. GMT)Forecast: -A$3.9 billionAustralia’s monthly trade deficit likely widened in February to A$3.9 billion from A$2.9 billion previoExports likely declined as weak commodity demand outstrips stronger service exports. Meanwhile, imshould improve as domestic demand strengthens and the aussie comes under downward pressure. The

monthly trade deficit will likely narrow through 2016 as exports improve on a weaker dollar, althoughcommodity prices and weak global demand will keep a lid on the gains.

Australia – Monetary Policy – AprilTime: 2:30 p.m. AEST (4:30 a.m. GMT)Forecast: 2%The Reserve Bank of Australia will likely keep rates on hold at 2% at its April meeting but maintain itbias. The domestic economy continues to improve, supported by steady employment growth. The recenappreciation of the Australian dollar will likely weigh on the board’s decision, but this trend is unlikelypersist, as commodity prices come under downward pressure from weaker global demand. Inflation remsubdued and the hot property market in Sydney looks to be cooling, which will give the central bank roto ease monetary policy further if needed.

India – Monetary Policy – AprilTime: 3:30 p.m. AEST (5:30 a.m. GMT)Forecast: 6.5%The Reserve Bank of India will likely cut the policy rate by 25 basis points to 6.5% at the April monetpolicy meeting. Inflation has largely been within the central bank's 6% target, and the continued fiscalconsolidation road map suggests that inflation is unlikely to spike. High-frequency indicators suggest tgrowth hasn't gained momentum in recent months, as industrial production has been falling. Therefore,expect the central bank to push home its easing bias in April and cut rates. Timing of further rate cuts wdepend largely on the monsoon season later in the year.

WEDNESDAY, APRIL 6

Malaysia – Foreign Trade – FebruaryTime: 2:00 p.m. AEST (4:00 a.m. GMT)Forecast: MYR1 billionMalaysia’s trade surplus likely narrowed to MYR1 billion in February. The data will likely show animprovement in year-on-year export growth. However, this will be largely due to low base effects. Oveweak conditions among other ASEAN countries and China will weigh on Malaysian exports for the remof 2016. Import growth is expected to be fairly low because of soft domestic conditions.

THURSDAY, APRIL 7

Taiwan – Consumer Price Index – MarchTime: 10:30 a.m. AEST (12:30 a.m. GMT)Forecast: 1.8%Taiwan’s inflation environment remains relatively strong, with headline CPI expected to have ticked up y/y. While this is softer than the 2.4% increase in the previous month, it is stronger than the price growthrough most of 2015. The boost from higher food prices should fade in coming months, but the low 2base should boost year-on-year growth.

FRIDAY, APRIL 8

Japan – Consumer Confidence – MarchTime: 3:00 p.m. AEST (5:00 a.m. GMT)Forecast: 40


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Japan's consumer confidence likely slid to 40 in March, down from 40.1 in February. Going below 40,could happen in the coming months, would be a significant dent for Prime Minister Shinzo Abe's econpolicies. Consumer spending fell in the December quarter and was a drag on growth. If consumers rempessimistic, spending will likely fall further in 2016. Weak wages are the catalyst for the pessimism; gl jitters and stock market volatility haven't helped either.

SUNDAY, APRIL 10

China – Monetary Aggregates – MarchTime: 2:00 a.m. AEST (Saturday 4:00 p.m. GMT)Forecast: 13.5%Money supply growth jumped at the start of the year but decelerated again in February and likely recovslightly in March. Easier monetary policy and higher loan quotas are spurring credit growth in China, bdemand for loans is weak as heavy industry remains mired in overcapacity and local governments havedebt levels. Hence money supply growth is likely to remain at current rates in the near future.

India – Foreign Trade – MarchTime: 4:30 a.m. AEST (Saturday 6:30 p.m. GMT)Forecast: -US$7.6 billionIndia's monthly trade deficit was likely US$7.6 billion in March. Both exports and imports are declininglobal growth is hurting India's export-orientated manufacturers, and supply bottlenecks haven't beenunclogged. Though India's bilateral trade with China isn't large, a slower Chinese economy hurts regiodemand, and this filters through to lower export demand for Indian goods. Elsewhere, low commodity have buttressed the overall trade balance, and imports likely slid again in March.


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The Long View

The US: The US$-denominated corporate bond issuance of 2016’s second quarter isexpected to grow by 5.5% annually for investment grade and to drop by -11.4% forhigh yieldBy John Lonski, Chief Economist, and Ben Garber, Economist, Moody’s Capital Markets Research Group,March 31, 2016

CREDIT SPREADS As measured by Moody's long-term average corporate bond yield, the recent investment grade corporabond yield spread of 156 bp was above its 122-point mean of the two previous economic recoveries. Anarrowing by this spread may be limited by more cash- or debt-funded acquisitions, spin-offs, stockbuybacks, and dividends. Subpar growth by business sales and profits will also add to credit risk, as wrising risk of high-yield defaults.

The recent high-yield bond spread of 712 bp is wider than what the spread’s fundamental drivers prediview of how the investment-grade financial company bond yield spread widened from its 108 bp averathe January 2014 through May 2015 to a recent 156 bp, the financial system is willing to supply liquidthe event of an adverse shock. Moreover, the implications for liquidity of regulatory changes merit abaverage scrutiny.DEFAULTS After rising from February 2015’s 1.9% to February 2016’s 3.6%, the US' trailing 12-month high-yieldrate is expected to reach 5.5% by January 2017.

US CORPORATE BOND ISSUANCEIn 2015, US$-denominated bond issuance advanced by 17.4% annually for IG, to $1.325 trillion and drby -16.4% to $352 billion for high yield. Across broad rating categories, 2015’s newly rated bank loanprograms from high-yield issuers advanced by 23.2% to $67.8 billion for Baa, increased by 22.7% to$207.45 billion for Ba, but plunged by -43.2% to $145.4 billion for programs graded less than Ba. Q4-2014’s worldwide corporate bond issuance showed annual percent changes of a 3.8% increase for IG an19.7% plunge for high-yield. At the same time, US$-denominated offerings advanced by 17% for IG asank by -9% for high yield.

Q1-2015’s worldwide corporate bond issuance increased annually by 9.5% for investment-grade and b12.1% for high-yield; US$-priced offerings the advances were 23% and 29%, respectively.

Q2-2015’s worldwide offerings of corporate bonds showed annual percent changes of +5% for IG and for high-yield, wherein US$-denominated supply soared higher by 30% for IG and plunged by -21% fo yield.

Q3-2015’s worldwide offerings of corporate bonds showed annual percent changes of +6% for IG and for high-yield, wherein US$-denominated offerings advanced by 17% for IG and plunged by -28% for yield.

Q4-2015’s worldwide offerings of corporate bonds showed annual percent declines of -9.4% for IG an32.9% for high-yield, wherein US$-denominated offerings dipped by -2.9% for IG and plunged by -36for high yield.

For yearlong 2016, worldwide corporate bond offerings are likely to rise by 4.7% annually for IG (to $trillion) and plunge by -18.0% for high yield (to $381 billion).

The financing of acquisitions and shareholder compensation will stand out among 2016’s uses of fundobtained via bond issues and newly-rated bank loan programs. Companies will resort to acquisitions adivestitures in order to better cope with the US’s subpar recovery. To the degree companies fearsignificantly higher bond yields, pre-fundings will rise.

US ECONOMIC OUTLOOKThe mid-point of the range for fed funds should finish 2016 no greater than 0.875%. In view of theconsiderable under-utilization of the world’s productive resources, low inflation should help to rein inTreasury bond yields. As long as labor is grossly underutilized and the global economy operates belowthe 10-year Treasury yield may not remain above 2.25% for long. A fundamentally excessive climb byTreasury bond yields and a pronounced slowing by expenditures in dynamic emerging market countrieamong the biggest threats to the adequacy of economic growth and credit spreads going forward.

The Long ViewThe Long ViewThe Long ViewThe Long View


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EUROPEBy Tomas Holinka of Moody’s AnalyticsMarch 31, 2016

At best, the euro zone economy will expand this year at about the same rate as last year. Weakening Uand emerging market economies, the influx of migrants, and a U.K. exit from the European Union are risks for the region's economy. Falling profitability and increasing regulation will hamper bank lendingtighten credit conditions, in direct contrast to the ECB’s intentions. Poorly anchored inflation expectatiand below potential growth prompted the ECB to ease already-accommodative monetary policy this wThe ECB decreased the refinancing rate to 0%, the deposit rate to -0.4%, and the interest rate on themarginal lending facility to 0.25%. The monthly purchases under the asset-purchase program will beexpanded to €80 billion starting in April and a new series of four targeted longer-term refinancingoperations, each with a maturity of four years, will be launched in June. This massive easing package srelease as much as €800 billion parked at the ECB’s deposit facility and reserves, moving inflation closthe ECB’s target through higher lending and a weaker euro. The euro zone's inflation fell well below ta-0.2% in February, while core inflation also unexpectedly declined to 0.7%, suggesting weaker demanddriven inflation. Although the prospects for less restrictive fiscal policy are improving, the lackluster gof fixed investment, especially into high-tech industries, will undermine potential growth and result inbelow-target inflation.

Yet the easing package is not good news for the banking sector. European banks face pushback over risregulatory costs and falling earnings. The ECB’s move to push the deposit rate further into negative terwill cut bank margins and earnings projections. Poor profitability combined with ongoing concerns abononperforming assets may contribute to a renewed selloff in bank equities and higher credit spreads. Lcreditworthiness would also prompt commercial banks to increase lending rates or impose charges on rdeposits. Although the negative deposit rate has reduced the interest payment on public debt, it has alsohalted structural fiscal improvements. The implicit interest rate on general government debt declined bpercentage points from 2008 to 2016 for many European countries. In contrast, the structural balance ipredicted to deteriorate in 2016. Spain’s structural deficit will likely jump to 2.6% of GDP, the highestamong the euro zone countries, followed by Slovenia, France and Portugal. The worsening fiscal positimay only encourage critics of ultra-accommodative monetary policy.

Moody’s Analytics expects U.K. economic growth to moderate to 2.0% this year from 2.2% in 2015, b

accelerating to 2.5% in 2017. Uncertainties regarding the outcome of the EU referendum, slated for Junwill weigh on first and second quarter growth. Investment will suffer the most, as companies will likelpostpone decisions on where to locate new plants and factories. Household consumption should continto perform well in the first quarter of 2016. While confidence slipped in February, retail sales data showvolumes slowed in February. Nevertheless, spending will be fueled by low inflation and the strong labomarket, with employment at a record high and expected to increase. The U.K. headline CPI rose 0.3% February after climbing 0.2% a month earlier. Additional support will also come from the BoE’sexceptionally loose monetary policy, with interest rates remaining at record lows throughout 2016. Netexports will remain a drag, although they could benefit from a weaker currency. Exit fears sent the pouslumping to a seven-year low against the U.S. dollar, which is good news for exporters because they cosee their price competitiveness improve in the short to medium term. Nonetheless, the EU’s sluggishrecovery and slowdown in emerging markets, especially in China, could hurt the country’s trade prospeWith little investment, no support from net trade, and less of a lift from household consumption, thegovernment would have to sharply increase its spending and investment. But the government already hlittle margin to maneuver, given the high levels of U.K. public deficit and debt.

The Long View


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The Week Ahead



ASIA PACIFICBy Emily Dabbs and the Asia-Pacific Staff of Moody’s AnalyticsMarch 31, 2016

Taiwan’s economy will struggle through 2016, as weak external conditions hamper growth. We estimaeconomy contracted 0.2% q/q in the opening quarter of 2016, following a steady 0.5% gain in theDecember quarter. Despite the weak growth outlook, the central bank will likely keep rates on hold as growth strengthens. But fiscal stimulus and a focus on economic reform should see Taiwan perform bethe latter half of the year, with the economy expanding around 0.4% in 2016 and strengthening to 2.3%2017.

Government stimulus policies helped boost domestic demand in the final quarter of 2015, helping Taiwavoid a technical recession. However, these measures are fading and domestic demand is faltering.Meanwhile, the export environment remains tough, as global demand is soft and Taiwanese exporters afacing increasing competition in the electronics market.

The biggest drag on Taiwanese exporters is the slowdown in China, but weak conditions elsewhere arecontributing to the decline. Taiwan’s total exports fell 10.4% in 2015, with shipments to China droppi13.3%. Exports to Japan and the U.S. held up a little better but still declined, down 3.2% and 1.8%,respectively in 2015. A broad-based downward trend is quite clear.

Taiwan’s key exports are machinery and electrical equipment, which account for more than 50% of tot

exports. While softer global demand is an important factor in the lackluster performance of these expothere has also been rising competition from cheaper alternatives in China, which also adds further dowpressure on Taiwan’s exports there.

The outlook for Taiwanese export-facing manufacturers remains grim. Global demand is unlikely to piin the near term, as China’s economy continues decelerating and Japan flirts with recession. However, U.S. is a bright spot. Historically, we find a 40% correlation between U.S. GDP growth and Taiwan’s egrowth, so stronger growth in the world’s largest economy should bolster global trade, boosting Taiwaeconomy. But this is unlikely to come to fruition until the latter half of the year.

As an export-oriented economy—exports make up 73% of Taiwan’s GDP—the slowdown in trade is fithrough to the domestic economy. Consumers have been turning pessimistic as households feel lessconfident about the future. Meanwhile, the unemployment rate has been ticking up since August, reach3.9% in February. Although it is relatively low compared with other economies in the region, and still below the 6% high reached in late 2009, it belies underlying issues within Taiwan’s labor force.

Youth unemployment is much higher than overall unemployment. Youth unemployment has fallen 1.1percentage points since January 2010, which is less than the 1.7-percentage point decrease in headlineunemployment. Workers who face long-term unemployment also tend to find it difficult to re-enter theworkforce. So the high level of youth unemployment doesn’t bode well for Taiwan’s future labor markYounger people also tend to spend more than their older counterparts, so high youth unemployment is drag on consumption growth.

The gap between temporary and permanent employment conditions is also hampering consumptiongrowth. While only 7% of total employees are in contract roles, the gap in compensation is quite high.Temporary employees tend to get paid less than their permanent counterparts and also have less jobsecurity and are provided lower levels of healthcare and other benefits.

Given these issues, Taiwan’s labor market is not as robust as the headline figures suggest. This is damp

wage growth and dragging on spending plans. Reform to Taiwan’s labor market will be key to boostingproductivity and bolstering consumption growth.

Taiwan’s central bank eased monetary policy further in March, reducing the policy rate by 12.5 basis pto 1.5%. This comes after a total 25-basis point reduction over 2015 and sets the policy rate at its lowelevel since March 2011.

Given the already-low interest rate, it is unclear how much of a boost any further easing will give to Taeconomy. And while low global energy prices have kept a lid on inflation in Taiwan over the last 12 mwhich gave the central bank room to ease monetary policy, this is starting to fade. Global energy pricesto have found a floor, which should boost year-on-year price growth in Taiwan in coming months despthe weak domestic environment. We expect the central bank will keep rates on hold through the rest of2016 as inflation pressures increase.

The Long View


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The Week Ahead



Ratings Round-UpBy Njundu Sanneh

Worrisome Default TrendsCorporate credit quality continues to deteriorate, as witnessed by the many negative rating revisions, w

increase the likelihood of defaults. Today’s US weekly list is highly skewed towards downgrades, at 229 changes. Energy and other commodity companies again comprise the major source of downgrades,12, as commodity prices remain relatively depressed. This trend is also reflected in Moody’s February report, which forecasts that the global speculative grade default rate will rise to 4.7% in one year, fromcurrent level of 3.7%. Six of 10 companies that defaulted in February were in the commodities sector,that looks to go on, as these companies are pushed further into speculative grade territory. Majorcommodity company downgrades include Targa Resources Corporation, Peabody Energy Corporation,Laredo Petroleum, Inc., with $5.1, $5.0 and $1.3 billion in debt affected, respectively.

In Europe rating changes were scant, with only two in the last week. According to the Moody’s Februdefault report, however, the commodity sector is going to be the driver of rising default rates in Europewell.

FIGURE 1Rating Changes - US Corporate & Financial Institutions: Favorable as % of Total Actions

0.0

0.2

0.4

0.6

0.8

1.0

0.0

0.2

0.4

0.6

0.8

1.0

Apr02 Sep05 Feb09 Jul12 Dec15

By Count of Actions By Amount of Debt Affected

* Trailing 3-month averageSource: Moody's

FIGURE 2Rating Key

BCF Bank Credit Facility Rating MM Money-MarketCFR Corporate Family Rating MTN MTN Program RatingCP Commercial Paper Rating Notes NotesFSR Bank Financial Strength Rating PDR Probability of Default RatingIFS Insurance Financial Strength Rating PS Preferred Stock RatingIR Issuer Rating SGLR Speculative-Grade Liquidity Rating

JrSub Junior Subordinated Rating SLTD Short- and Long-Term Deposit RatingLGD Loss Given Default Rating SrSec Senior Secured RatingLTCF Long-Term Corporate Family Rating SrUnsec Senior Unsecured RatingLTD Long-Term Deposit Rating SrSub Senior SubordinatedLTIR Long-Term Issuer Rating STD Short-Term Deposit Rating

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The Week Ahead



FIGURE 3 Rating Changes: Corporate & Financial Institutions – US

FIGURE 4 Rating Changes: Corporate & Financial Institutions – EUROPE

Date Company Sector RatingAmount

( Million)Up/

Down

OldLTD

Rating

NewLTD

Rating

IG/SG

Country

3/24/16 ENI S.P.A. Industrial SrUnsec/LTIR/MTN 18,041 D A3 Baa1 IG ITALY3/24/16 SEKERBANK T.A.S. Financial LTD D Ba2 Ba3 SG TURKEY

Source: Moody's

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Market Data

0

200

400

600

800

0

200

400

600

800

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Spread (bp) Spread (bp) Aa2 A2 Baa2

Source: Moody'sSource: Moody's

Figure 1: 5-Year Median Spreads-Global Data (High Grade)

0

400

800

1,200

1,600

2,000

0

400

800

1,200

1,600

2,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Spread (bp) Spread (bp) Ba2 B2 Caa-C

Source: Moody's

Figure 2: 5-Year Median Spreads-Global Data (High Yield)

Spreads


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CDS Movers

CDS Implied Rating RisesIssuer M ar 3 0 M ar 23 Senio r RatingsBank of America Corporation Baa2 Baa3 Baa1Wells Fargo & Company A2 A3 A2Citigroup Inc. Baa2 Baa3 Baa1Verizon Communications Inc. A2 A3 Baa1Microsoft Corporation Aa3 A1 AaaWalt Disney Company (The) Aa2 Aa3 A2Procter & Gamble Company (The) Aaa Aa1 Aa3PepsiCo, Inc. A1 A2 A1UnitedHealth Group Incorporated Aa3 A1 A3Kraft Heinz Foods Company A1 A2 Baa3

CDS Implied Rating De clinesIssuer M ar 3 0 M ar 23 Senio r RatingsBrunswick Corporation Baa2 A3 Ba1Toyota Motor Credit Corporation Baa1 A3 Aa3Energy Transfer Partners, L.P. B3 B2 Baa3Anadarko Petroleum Corporation B2 B1 Ba1Nissan Motor Acceptance Corporation Ba1 Baa3 A3International Lease Finance Corporation B1 Ba3 Ba2HCP, Inc. B1 Ba3 Baa1Noble Energy, Inc. B1 Ba3 Baa3AES Corporation, (The) B1 Ba3 Ba3Goodyear Tire & Rubber Company (The) Ba2 Ba1 Ba3

CDS Spread IncreasesIssuer Senio r Ratings M ar 3 0 M ar 23 Spread DiNine West Holdings, Inc. Caa3 4,188 3,858 330iHeartCommunications, Inc. Ca 5,693 5,392 301Chesapeake Energy Corporation Caa3 3,019 2,811 209Marathon Oil Corporation Ba1 624 527 97GenOn Energy, Inc. Caa2 1,669 1,605 65Devon Energy Corporation Ba2 560 499 61MBIA Inc. Ba1 787 730 57USG Corporation B1 317 264 54Freeport-McMoRan Inc. B2 1,078 1,028 50Bunge Limited Finance Corp. Baa2 255 205 50

CDS Spread DecreasesIssuer Senio r Ratings M ar 3 0 M ar 23 Spread DiPeabody Energy Corporation C 16,039 17,331 -1,291K. Hovnanian Enterprises, Inc. Caa2 1,620 1,808 -188AK Steel Corporation Caa1 1,802 1,890 -88Cablevision Systems Corporation B1 626 714 -87United States Steel Corporation B2 1,207 1,293 -86Sears Roebuck Acceptance Corp. Caa2 1,736 1,821 -85Sears Holdings Corp. Caa2 1,425 1,495 -70Toys 'R' US, Inc. Caa2 1,117 1,177 -60Avon Products, Inc. Ba3 902 956 -54Exelon Generation Company, LLC Baa2 197 244 -47Source: Moody's, CMA

CDS Spreads

CDS Implied Ratings

CDS Implied Ratings

CDS Spreads

Figure 3. CDS Movers - US (March 23, 2016 – March 30, 2016)


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CDS Implied Rating RisesIssuer M ar 3 0 M ar 23 Senio r RatingsSEB A3 Baa2 Aa3Swedbank AB A3 Baa2 Aa3Rabobank A2 A3 Aa2Nordea Bank AB Baa1 Baa2 Aa3Abbey National Treasury Services plc A3 Baa1 A1ING Bank N.V. A2 A3 A1Portugal, Government of Ba3 B1 Ba1Danske Bank A/S A2 A3 A2Erste Group Bank AG Ba1 Ba2 Baa2Santander UK PLC Baa1 Baa2 A3

CDS Implied Rating DeclinesIssuer M ar 3 0 M ar 23 Senio r RatingsSCOR SE Baa1 A2 A2NEXT plc Baa2 A3 Baa2Barclays Bank PLC Ba1 Baa3 A2The Royal Bank of Scotland plc Ba1 Baa3 A3Anheuser-Busch InBev SA/NV Baa1 A3 A2Orange A3 A2 Baa1DZ BANK AG Baa1 A3 Aa3Volkswagen Aktiengesellschaft Ba2 Ba1 A3Tesco Plc B1 Ba3 Ba1Bank of Ireland Ba2 Ba1 Baa2

CDS Spread IncreasesIssuer Senio r Ratings M ar 3 0 M ar 23 Spread DifPortugal Telecom International Finance B.V. Caa2 5,412 4,943 470Norske Skogindustrier ASA Ca 3,954 3,825 129Matalan Finance plc Caa1 1,093 990 104Anglo American plc B1 640 581 58Novo Banco, S.A. Caa1 968 932 36Stena AB B2 702 668 34Astaldi S.p.A. B1 984 950 34ArcelorMittal Ba2 551 520 31Ensco plc B2 706 684 22Rexel SA Ba3 214 191 22

CDS Spread DecreasesIssuer Senio r Ratings M ar 3 0 M ar 23 Spread DiffErste Group Bank AG Baa2 141 164 -23CMA CGM S.A. B3 848 870 -22SEB Aa3 68 86 -18Swedbank AB Aa3 70 85 -15Premier Foods Finance plc Caa1 150 165 -15Nordea Bank AB Aa3 79 93 -13Santander UK PLC A3 78 87 -9Banco BPI S.A. Ba3 354 363 -9Selecta Group B.V. Caa1 669 678 -9Abbey National Treasury Services plc A1 70 78 -8Source: Moody's, CMA

CDS Spreads

CDS Implied Ratings

CDS Implied Ratings

CDS Spreads

Figure 4. CDS Movers - Europe (March 23, 2016 – March 30, 2016)


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Moody’s Capital Markets Research recent publications

Sovereign Risk Report: Hungary’s Sovereign Credit Risk Drops on Negative Rate Policy

Powerful Rally Lifts High Yield Outlook (Capital Markets Research) Market Comment: Builder Credit Outperforms Amid Steady but Slow Construction Recovery

Sovereign Risk Report: Brazil’s Sovereign Risk Falls Even as the Economy Falters

BNP Paribas: BNP Paribas: Market-Implied Ratings Improve from Recent Lows

Long-Term Profits Outlook Lowest in Decades (Capital Markets Research)

Occidental Petroleum Corporation: Occidental Petroleum Corp.: Market-Implied Ratings Rebound Off Lows

Valeant Pharmaceuticals International, Inc: Valeant: Market-Implied Ratings Dip to Low Points

U.S. Bancorp: U.S. Bancorp’s Market Signals Follow Different Paths

Market Signals Review: Deutsche Bank AG: Three Market-Implied Ratings Stage Modest Rebound

Market Signals Review: Standard Chartered PLC: Two Market-Implied Ratings Move Lower

Sovereign Risk Report: ECB Bazooka Sparks Decline In European Sovereign Credit Risk; Cyprus Steady

Securitization - Asia Pacific: Negative Impact from China Slowdown on Asia Securitization Will Vary by Cobut Will Be Generally Limited

Credit Risks Rise as Long-Term Growth Prospects Fade (Capital Markets Research)

Market Signals Review: Barclays PLC: Market-Implied Ratings Weaken

Market Signals Review: Ford Motor Co.: Two Market Signals Move Up

These and others are also available at:http://www.moodys.com/cmrg

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