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Fast Declining EDF Favors Thinner High-Yield Bond Spread (Capital Market Research) (Weekly Market Outlook)

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WEEKLY

MARKET OUTLOOK

FEBRUARY 11, 2021





CAPITAL MARKETS RESEARCH

Moody’s Analytics markets and distributes all Moody’s Capital Markets Research, Inc. materials. Moody’s Capital Markets Research, Inc . is a subsidiary of Moody’s Corporation. Moody’s

Analytics does not provide investment advisory services or products. For further detail, please see the last page.

Fast Declining EDF Favors Thinner High-Yield Bond
Spread

Credit Markets Review and Outlook

by John Lonski

Fast Declining EDF Favors Thinner High-Yield Bond Spread

»

FULL STORY PAGE 2

The Week Ahead

We preview economic reports and forecasts from the US and Asia/Pacific regions.

»

FULL STORY PAGE 7

The Long View

Full updated stories and

key credit market metrics:

Caa-rated debt has

comprised 28% of

February-to-date’s heavy

issuance of high-yield

bonds.

»

FULL STORY PAGE 11

Ratings Round-Up

European Change Activity Weakens

»

FULL STORY PAGE 14

Market Data

Credit spreads, CDS movers, issuance.

»

FULL STORY PAGE 17

Moody’s Capital Markets Research

recent publications

Links to commentaries on: Rising prices, stimulus, core profits, yield spreads, virus, Congress ,

misery, issuance boom, default rate, volatility, credit quality, bond yields, record savings rates,

demographic change, high tech, complacency, Fed intervention, speculation, risk, credit stress,

optimism, corporate credit, leverage, VIX.

»

FULL STORY PAGE 22

Credit

Spreads

Investment Grade: Year-end 2021’s average investment grade

bond spread may slightly exceed its recent 102 basis points.

High Yield: A composite high-yield spread may top its recent

360 bp by year-end 2021.

Defaults

US HY default rate: According to Moody's Investors Service,

the U.S. ' trailing 12-month high-yield default rate jumped

from December 2019’s 4.3% to December 2020’s 8.4% and

may average 7.9% for 2021’s second quarter.

Issuance

For 2019’s

offerings of US$-denominated corporate bonds,

IG bond issuance rose 2.6% to $1.309 trillion , while high-

yield bond issuance surged by 58% to $440 billion .

In 2020, US$-denominated corporate bond issuance soared

54% for IG to a record $2.012 trillion , while high-yield

advanced 30% to a record-high $570 billion .

For 2021, US$-denominated corporate bond offerings may

decline 24% (to $1.528 trillion ) for IG and drop 7% (to $529

billion) for high-yield, where both forecasts top their

respective annual averages for the five years ended 2020 of

$1.494 trillion for IG and $410 billion for high-yield.

Moody’s

Analytics Research

Weekly M

arke

t Outlook Contributors:

Moody's Analytics/ New York :

John Lonski
Chief Capital Markets Economist

1.212.553 .7144

john.lonski@moodys.com


Yukyung Choi
Quantitative Research

Moody's Analytics/ Asia-Pacific :

Shahana Mukherjee
Economist

Denise Cheok
Economist

Moody's Analytics/ Europe :

Ross Cioffi
Economist

Moody’s Analytics/ U.S. :

Mark Zandi

Chief Economist, Moody’s Analytics

Michael Ferlez

Economist

Editor

Reid Kanaley

Click here for

Moody’s Credit

Outlook

, our sister publication

containing Moody’s rating

agency analysis of recent news

events, summaries of recent

rating changes, and summaries

of recent research.

Contact:

help@economy.com

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CAPITAL MARKETS RESEARCH

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FEBRUARY 11, 2021

CAPITAL MARKETS RESEARCH / MARKET OUTLOOK / MOODYS.COM

Credit Markets

Review and Outlook

Credit Markets Review and Outlook

By John Lonski , Chief Capital Markets Economist, Moody’s Capital Markets Research

Fast Declining EDF Favors Thinner High-Yield Bond Spread

Moody’s Analytics’ average expected default frequency metric of U.S. /Canadian high-yield issuers, or high-

yield EDF, recently sank to 2.36% for its lowest reading since the 2.35% of early October 2018. Just prior to

October 2018, the high-yield EDF metric’s month-long average formed a now nearly 6.5-year low of 2.25%

in September 2018, when the Bloomberg/ Barclays high-yield bond spread averaged 325 basis points. In

conjunction with the latest drop by the high-yield EDF, the Bloomberg/ Barclays high-yield bond spread

recently approached 325 basis points.

In terms of month-long averages, the post Great Recession low for the high-yield bond spread is the 320 bp

of January 2018. However, that trough was well above previous bottoms. Prior to the Great Recession, the

high-yield bond spread averaged less than 300 bp in each month beginning in December 2006 and ending

with June 2007, wherein the spread bottomed at May 2007’s 247 bp. During May and June of 2007, the

high-yield EDF’s month-long average set a record low of 1.6%.

Once COVID-19 risks are sufficiently reduced, business prospects should improve by enough to drive the

high-yield EDF under 2.25%. In turn, the high-yield bond spread might approach 300 bp.

The statistical record shows that the high-yield bond spread will be lower (i) the lower is the average high-

yield EDF metric and (ii) the lower is the change in the EDF metric during the past three months. The latter

explanatory variable recognizes that the market’s interpretation of the high-yield EDF depends on its

direction of change. For example, a 3% average high-yield EDF metric that has risen by a percentage point

over the last three months is likely to be viewed far differently than a 3% high-yield EDF that has dropped

by a percentage point over the last three months.

As inferred from a simple ordinary least squares regression, the recent 2.36% high-yield EDF and its

historically deep 2.99 percentage point decline of the last three months favor a 280 bp midpoint for the

high-yield bond spread. However, it should be noted that the depth of the decline by the high-yield EDF

over the last three months has reduced the high-yield bond spread's expected midpoint by 85 bp. Had the

high-yield EDF instead been unchanged from its reading of three months back, the high-yield bond spread’s

expected midpoint would have been 365 bp.

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CAPITAL MARKETS RESEARCH

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Credit Markets

Review and Outlook

Corporate Bond Market Believes Treasury Bonds Will Remain Relatively Low

The quickness with which corporate bond yield spreads have recently narrowed partly reflects a good deal of

confidence in the durability of now atypically low U.S. Treasury bond yields. February 10’s dovish comments

by Federal Reserve chairman Jerome Powell reinforced expectations of an extended stay by a 10-year

Treasury yield of less than 1.5%.

It may be worth remembering that corporate bond yield spreads were slow to narrow following the Great

Recession partly because investors harbored doubts regarding the longevity of the then multi-decade lows

of benchmark Treasury bond yields.

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Apr-96

May-98

Jun-00

Jul-02

Aug-04

Sep-06

Oct-08

Nov-10

Dec-12

Jan-15

Feb-17

Mar-19

Apr-21

200

350

500

650

800

950

1,100

1,250

1,400

1,550

1,700

1,850

High-Yield Bond Spread Predicted by EDF Model

Actual High-Yield Bond Spread

Figure 1: Predicted High-Yield Bond Spread Is Now Under Actual High-Yield Bond Spread

month-long averages in basis points

sources: Bloomberg/ Barclays , Moody's Analytics

220

370

520

670

820

970

1,120

1,270

1,420

1,570

1,720

1,870

Jan-96

Feb-98 Mar-00 Apr-02 May-04 Jun-06

Jul-08

Aug-10

Sep-12

Oct-14 Nov-16 Dec-18

Jan-21

1.25

2.25

3.25

4.25

5.25

6.25

7.25

8.25

9.25

10.25

11.25

12.25

13.25

14.25

Average High-Yield EDF Metric: % (L)

High-Yield Bond Spread: bp (R)

Figure 2: High-Yield Bond Spread Was Much Wider When High-Yield EDF First Sank Under 2.4% Following

the Great Recession

month-long averages

sources: Bloomberg/ Barclays , Moody's Analytics

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Credit Markets

Review and Outlook

Nevertheless, the declining trend of the then relatively low average high-yield EDF metric instead favored

much thinner high-yield bond spreads. December 2010 through July 2011’s averages of 2.21% for the high-

yield EDF metric and of -0.36 percentage points for its three-month change generated a 346 bp average for

the predicted high-yield bond spread. By contrast, the actual high-yield bond spread averaged 494 bp for a

wide 148 bp premium over the spread predicted by the EDF model.

At that time, investors fretted over what would happen to December 2010 through July 2011’s 3.27%

average of the 10-year Treasury bond yield once the Federal Reserve inevitably hiked fed funds from what

was viewed as an unsustainably low 0.125%. Investors could not help but note how the accompanying 30-

year Treasury bond yield averaged a much higher 4.42%, where the latter might be within a likely range for

the 10-year Treasury yield once monetary policy was normalized.

We now know that fears over an extended stay by a 10-year Treasury yield at 3% or higher were overblown.

As it turned out, the Fed started a bond buying program in 2012 that lowered the 10-year Treasury yield’s

month-long average to July 2012’s 1.50%. Thereafter, the 10-year Treasury yield’s monthly average would

climb no higher than October 2018’s 3.16%, or when fed funds’ midpoint was 2.13%. By the time fed funds

was hiked to 2.38% in December 2018, the 10-year Treasury yield had eased to 2.84%. The declining trend

of the 10-year Treasury yield correctly predicted the unsustainability of the 2.38% fed funds rate.

Why Treasury Bond Yields Will Not Soon Enter a Secular Climb

Barring a dramatic rise by inflation expectations, the midpoint of the federal funds rate is unlikely to average

at least 2.5% over a 12-month span. In contrast to the Federal Open Market Committee’s median estimate

of a long-term federal funds rate of 2.5%, the Congressional Budget Office recently projected a 1.4%

average for the three-month Treasury bill rate of 2025-2030, which implies an accompanying average for

the federal funds rate that is no greater than 1.5%.

The CBO’s accompanying forecast of a 0.2% average for the 3-month Treasury bill rate during 2020-2024

appears to leave room for just one fed funds rate hike from its current 0.125% by the end of 2024.

Moreover, as inferred from the CBO’s projection of a 1.3% average for 2000-2024’s 10-year Treasury yield,

the benchmark Treasury yield is expected to average 1.41% during March 2021 through December 2024.

However, the latter seems too low if, as expected, the 10-year Treasury yield resides in a range of 1.5% to

2.00% during 2022-2024.

At the other extreme, the CBO’s January 2021 forecast of a 2.8% average for the 10-year Treasury yield

during 2025-2030 seems too high in the context of what is likely to be a mature economic recovery, a 1.4%

average for the 3-month Treasury bill rate and comparatively slow real economic growth. The combination

of a slow underlying rate of economic growth and the likely containment of inflation expectations suggest

the 10-year Treasury yield’s 2025-2030 average might be closer to 2.25%.

As inferred from CBO projections, U.S. real GDP will rise by only 2.0% annually, on average, through

2031.Growth is expected to be constrained by the estimated 0.4% average annual growth rate for

America’s potential labor force through 2031.

Given expectations of record-slow labor force growth, a 2% average annual rate of real GDP growth

through 2031 requires labor productivity growth of 1.6% annually, on average. Unlike projections of

demographic change (such as labor force growth), forecasts of labor productivity growth are highly

uncertain.

For example, the predicted 1.6% labor productivity growth over the next 10 years is significantly faster than

labor productivity’s average annualized rates of growth—1.1% over the past 10 years and 1.2% over the last

25 years. Nevertheless, labor productivity advanced by a scintillating 3.0% annualized, on average, during

the 10-years-ended 2005, when real GDP expanded by 3.4% annualized. Today, few if any dare to predict a

3% average annual rate of economic growth through 2021.

Russell 2000’s Lift-Off Aids High-Yield Credits

The high-yield EDF will be lower (i) the higher is the market value of a firm’s business assets relative to its

debt and (ii) the less volatile is the market value of a firm’s business assets. Thus, the latest slide by the high-

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CAPITAL MARKETS RESEARCH

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Credit Markets

Review and Outlook

yield EDF partly stems from a now long-lived equity market rally. Of special importance to high-yield credits

is how the Russell 2000 index of smaller company share prices has led the overall U.S. equity market by a

wide margin since the end of 2020’s third quarter. High-yield issuers tend to be smaller than the S&P 500’s

member companies.

Recently, the 15.3% 2021-to-date advance by the Russell 2000 outpaced comparably measured gains of

5.6% for the overall U.S. equity market and 8.6% for the NASDAQ. Since the end of September 2020, the

Russell 2000’s 51.0% surge sped past the accompanying increases of 20.8% for the U.S. equity market and

25.4% for the NASDAQ.

The late 1990s showed just how important the components of an equity market rally are to high-yield

bonds. Despite the 20.4% average annualized advance by the market value of U.S. common stock during

the two-years-ended 1999, the high-yield EDF metric still soared from December 1997’s 3.9% to December

1999’s 7.9%. One of the primary reasons for the climb by the high-yield default risk metric amid an equity

market rally was because of how the much slower 5.5% average annual increase by the Russell 2000 stock

price index lagged far behind the accompanying 15.4% average annual increase for the outstandings of U.S.

high-yield bond debt. In addition, the Value Line geometric price index that focuses on the median percent

change of unweighted share prices actually fell by 4% annualized during the two-years-ended 1999.

In terms of calendar-quarter observations, the high-yield EDF generates a meaningful correlation of 0.58

with the difference between the year-over-year growth rates of high-yield corporate bonds outstanding and

the Russell 2000 stock price index. For the same sample that begins with 1996's first quarter, the high-yield

EDF shows a correlation of 0.75 with a composite high-yield bond spread.

Moreover, the ratio of high-yield corporate bonds outstanding to the Russell 2000 reveals a correlation of

0.69 with the composite high-yield bond spread.

-55

-44

-33

-22

-11

0

11

22

33

44

96Q1

98Q3

01Q1

03Q3

06Q1

08Q3

11Q1

13Q3

16Q1

18Q3

21Q1

1

3

5

7

9

11

13

High-Yield Average EDF Metric: % (L)
High-Yield Corporate Bonds Outstanding less Russell 2000: yy % changes in % points (R)

Figure 3: Market-Wide High-Yield EDFs Tend to Be Lower the Faster the Russell 2000 Grows

Vis-a-vis High-Yield Bond Debt

sources: Dow Jones , Moody's Analytics

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Credit Markets

Review and Outlook

In general, the yearly percent change of the Russell 2000 wields far more influence over both the high-yield

EDF and the composite high-yield bond spread than does the yearly percent change of the outstanding

amount of high-yield bond debt.

70%

90%

110%

130%

150%

170%

190%

210%

87Q4

90Q2

92Q4

95Q2

97Q4

00Q2

02Q4

05Q2

07Q4

10Q2

12Q4

15Q2

17Q4

20Q2

150

325

500

675

850

1,025

1,200

1,375

1,550

1,725

High-Yield Bond Spread: bp (L)
Ratio of U.S. High-Yield Corporate Bonds Outstanding to Russell 2000 Stock Price Index (R)

Figure 4: Rallies by Russell 2000 Often Are Joined by a Thinner High-Yield Bond Spread

sources: Dow Jones , Moody's Analytics

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The Week Ahead










CAPITAL MARKETS RESEARCH

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The Week Ahead – U.S., Europe, Asia-Pacific

THE U.S.

By Mark Zandi, Chief Economist, Moody’s Analytics

Biden Goes Big

Nearly a year after the pandemic began, it continues to do significant economic damage. Employment

eked out a small gain in January after declining in December, and given significant historical revisions to

the employment numbers, employment remains nearly 10 million below its pre-pandemic peak.
Employment is falling again in the pandemic-stricken leisure and hospitality, retail, and healthcare

industries, but it remains soft across nearly all industries. Unemployment fell sharply last month to
6.3%, but this reflects a pullback in the labor force, which remains 2 percentage points smaller than its

pre-pandemic peak. Without the massive monetary and fiscal support provided since the pandemic hit,

the economy would likely now be suffering a double-dip recession.


More fiscal support is on the way. President Biden and the Democratic-controlled Congress are quickly
moving on a fiscal relief package similar to the president’s proposed $1.9 trillion

American Rescue Plan

.

Lawmakers are using the reconciliation budget process to allow passage of the plan with a simple

majority in the Senate without support from Republicans. Passage will require full support from the 50

Democratic Senators to get the necessary majority vote, so centrist Democrats may demand that some

parts of the plan be slimmed down. But, it will remain a hefty package. If so, the total amount of
discretionary deficit-financed fiscal support provided to the economy during the pandemic will come to
well over $5 trillion , equal to almost 25% of the nation’s pre-pandemic GDP. This compares with the

fiscal support of no more than 10% of GDP that has been provided by other countries during the

pandemic. Total U.S. fiscal support provided during the financial crisis, including the 2009

American

Recovery and Reinvestment Act

, amounted to substantially less than 10% of the nation’s pre-crisis

GDP.

The scale of the fiscal response is

raising concerns

that it is too large. Though the pandemic is an

enormous blow to the economy, some critics say an additional $1.9 trillion in deficit-financed support
is not necessary given the support already provided and prospects that the pandemic will begin to wind
down as vaccinations ramp up. Some argue the package may be too big, pushing the economy past full

employment and bringing on undesirably high inflation and interest rates. There is also a concern that if
lawmakers ante up so much for pandemic relief, they won’t be able to muster the political will for
additional fiscal support needed to address the nation’s long-term problems including income and

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The Week Ahead










CAPITAL MARKETS RESEARCH

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CAPITAL MARKETS RESEARCH / MARKET OUTLOOK / MOODYS.COM

wealth inequality and the eroding public infrastructure. These are reasonable worries, but they are

overstated. To address these concerns, lawmakers should consider making some changes to the $1.9

trillion package, including scaling back parts of it. But, as they say, they should go big.

Closing the gap

Most obviously, the economy is a long way from full employment, so a worrisome acceleration in
inflation is also far off. Adding the unemployed plus workers counted by the Bureau of Labor Statistics

as employed but not working due to the pandemic (a statistical problem acknowledged by the BLS)

plus those who left the workforce due to the pandemic comes to over 16 million people—10% of the

workforce. And this doesn’t count employed workers who have suffered lost hours or pay cuts. Another
way of measuring this is through the output gap—the difference between actual and potential GDP as

a percent of potential GDP. Assuming the economy was operating at its potential just prior to the

pandemic, which was the subject of contentious debate at the time, since inflation was still undesirably
below the Federal Reserve’s 2% target, and assuming the economy’s nominal potential growth is 4%
(2% real potential growth plus 2% inflation), then the current output gap is more than 5%. To close

this output gap any time soon requires deficit-financed fiscal support closer to twice that percentage,
since the so-called multipliers on this support in the pandemic (the increase in GDP resulting from an

$1 increase in fiscal support) are estimated at near 60 cents . This suggests that President Biden’s $1.9

trillion package, which equals 8.5% of potential GDP, is the appropriate size (8.5% times 0.6 equals

5%).

To be sure, this calculation involves lots of estimates and there is overwhelming uncertainty given that

much depends on how the pandemic and vaccinations play out, but this would argue for even more
fiscal support. In the fog of a crisis, it is prudent for policymakers to err on the side of potentially

providing too much support rather than too little. It is critical that households and businesses know

that the government has their back. Without this comfort, everyone is more skittish and prone to

panic, a state that exacerbates the economic and social costs of the crisis.

The Federal Reserve has all but played its monetary policy hand, which also argues for fiscal
policymakers to provide even more support. With short-term interest rates pinned to the zero lower

bound, and the Fed purchasing $120 billion in Treasury and mortgage-backed securities each month to

keep long-term rates down, the central bank isn’t left with much to achieve its objective of full
employment and 2% inflation. And given the change in its

monetary policy framework

at the end of

last year, the Fed is targeting inflation above 2% for a long while to make up for inflation being stuck

below 2% for most of the time since the financial crisis. Indeed, to achieve its objectives under the new

framework, the Fed needs fiscal policymakers to step up with substantially more help.

The appropriate time

Moreover, with the Fed committed to keeping interest rates low for a long time, the reasonable
concern that the economic benefit of deficit-financed fiscal support will get washed out by higher

interest rates doesn’t apply. This was a legitimate critique of the Trump tax cuts in 2018 as long-term

rates rose with the increase in the deficit. The 10-year Treasury had risen to well over 3% by the end of

that year, before Trump’s trade wars undermined the economy and interest rates fell back. Ten-year

Treasury yields have only recently risen to just over 1%, and that’s after largely discounting the
likelihood of a big fiscal package from President Biden. With the economy struggling against the raging

pandemic and far from full employment, inflation well below the Fed’s target, and interest rates about
as low as they have ever been, there have been few more appropriate times in our economic history for

policymakers to pursue aggressively expansionary fiscal policy.

Devastation wrought by the pandemic on the finances of less-skilled, low-income households and
minority groups is supercharging the need for a large fiscal package. The overall unemployment rate is

just over 3 percentage points higher today than prior to the pandemic, but it is up 4 percentage points
for those with less than a high-school degree and Black Americans and up 5 percentage points for
Hispanics. These are the same demographic groups that had few financial resources prior to the

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The Week Ahead










CAPITAL MARKETS RESEARCH

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pandemic and have struggled under skewed income and wealth distribution for two generations.

Moreover, they are more likely to have lost their jobs permanently due to the pandemic, since so many

had worked in the now-fundamentally changed leisure & hospitality and retail industries. These

households need financial support from the government to navigate through the remainder of the
pandemic and to get back to work on the other side.

This does suggest some changes to further target Biden’s $1.9 trillion package at those most in need.
Most obvious is to reduce the income threshold for another round of stimulus checks. The President is
asking for $425 billion to provide $1,400 checks to those making less than $75,000 a year and phasing

out after $100,000 in annual income. This price tag could be significantly reduced if the income

thresholds were lowered to focus on low-income Americans. The president may also want to consider
scaling back the $600 billion in aid he is seeking for hard-pressed state and local governments. We

estimate a meaningfully

smaller budget shortfall

for those governments through fiscal year 2022 than

the president is asking for. Freeing up these funds should make it politically easier for the president to

come back to Congress later this year with another fiscal package, this one more along the lines of

his

Build Back Better agenda

to address the nation’s longer-term needs, including infrastructure,

climate change and racial equity. While the president is sure to use the reconciliation process again to

get this done, it will require full Democratic support in the Senate, which will be more straightforward

to get from centrist Democrats holding the key swing votes and who will surely be more focused on
the nation’s fiscal situation when the pandemic is behind us.

These suggestions and political considerations notwithstanding, Biden and Congress should go big.

Getting through the pandemic and reaching full employment as fast as possible is critical, and his plan
does it.

Next Week

January retail sales will be released Wednesday. During the week we also expect numbers on industrial
production, business inventories, the latest Philadelphia Fed survey, and New York's Empire State
manufacturing survey. Minutes from the Federal Reserve’s latest Federal Open Market Committee

meeting are due. January producer prices and import-export prices will add to our view of inflation

pressures. Housing indicators will include the market index from the National Association of Home

Builders along with new residential construction and existing-home sales.

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The Week Ahead










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Asia-Pacific

By Shahana Mukherjee of Moody’s Analytics

Weak Domestic Spending Likely Moderated Japan's GDP

We expect Japan’s economy to have grown by 1% in quarterly terms in the December quarter,

following a 5.3% rebound in the prior quarter. This is expected to translate into a yearly contraction of

3% and result in a full-year contraction of -5.3%.

Japan’s economy rebounded strongly in the September quarter, anchored by a turnaround in private

consumption as well as an improved trade position. Since then, however, while the external position

has not been sizeably disturbed by the COVID-19 resurgence in Western economies, domestic

spending has remained underwhelming. Domestic spending has been challenged by strained

employment conditions and the persistent threat of an increase in local virus transmission, which has

kept households cautious. We expect the softness in domestic demand to have largely moderated the

December quarter revival, though a quarterly gain should still accrue from a relatively resilient exports’

position.

Thailand’s GDP is likely to have grown by 2.3% in quarterly terms in the December quarter, following a

6.5% rebound in the prior quarter. This is expected to translate into a yearly decline of 4% in the final

quarter, bringing full-year GDP contraction to 6.1% in 2020. The tourism-reliant economy suffered a

significant setback due to the hit from international restrictions caused by the pandemic, although

tourism has gradually restarted since December. Domestic spending bounced back in the September

quarter, aided by a series of stimulus measures. However, the deep strain on the external sector

persisted through December, and this is expected to have weighed heavily on the pace of revival in the

final quarter.

Australia’s unemployment rate is likely to have settled at 6.5% in January, from 6.6% in December.

Domestic conditions have steadily been on the mend, buoyed by substantial fiscal and monetary

support. The official unemployment rate dropped 0.2 percentage point in December when 50,000 jobs

were added to the market as states such as Victoria rolled back stringent pandemic-related restrictions.

We expect the revival in domestic spending and a gradual resumption in intra-state travel to have

strengthened the labour market correction in January.

Japan’s consumer prices are likely to have remained unchanged at -1% in yearly terms in January. Core

prices, excluding the effect of volatile items such as food, alcohol and fuel, are expected to have

remained weak, at -0.5%. The intense third wave of COVID-19 led to the reimposition of the state of

emergency across several prefectures, which likely kept confidence subdued, and thus spending,

especially on discretionary items, weak over this period, inhibiting any meaningful gains in consumer

prices since December.

Key indicators

Units

Moody's Analytics Confidence Risk

Last

Mon @ 10:50 a.m.

Japan GDP for Q4

% change yr ago

1

3

5.3

Mon @ 1:30 p.m.

Thailand GDP for Q4

% change yr ago

-4

3

-6.4

Mon @ 3:00 p.m.

Indonesia Foreign Trade for January

US$ bil

1.7

3

2.1

Mon @ 11:20 p.m.

India Foreign Trade for January

US$ bil

-14.5

3

-15.4

Wed @ 10:50 a.m.

Japan Foreign Trade for January

¥ bil

520

3

477

Wed @ 10:50 a.m.

Japan Machinery Orders for December

% change

-2.5

2

1.5

Wed @ 11:30 a.m.

Singapore Nonoil Exports for January

% change yr ago

5.2

3

6.8

Thu @ 11:30 a.m.

Australia Employment for January

%

6.5

3

6.6

Thu @ 6:30 p.m.

Indonesia Monetary Policy for January

%

3.75

4

3.75

Fri @ 10:50 a.m.

Japan CPI for January

% change yr ago

-1

3

-1

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11

FEBRUARY 11, 2021

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CAPITAL MARKETS RESEARCH

The Long View

d

The Long View

Caa-rated debt has comprised 28% of February-to-date’s heavy issuance of

high-yield bonds.

By John Lonski, Chief Capital Markets Economist, Moody’s Capital Markets Research

February 11, 2021

CREDIT SPREADS

As measured by Moody's long-term average corporate bond yield, the recent investment grade corporate
bond yield spread of 102 basis points was less than its 116 basis-point median of the 30 years ended 2019.

This spread may be no wider than 110 bp by year-end 2021.

The recent composite high-yield bond spread of 360 bp approximates what is suggested by the

accompanying long-term Baa industrial company bond yield spread of 145 bp but is much narrower than

what might be inferred from the recent VIX of 21.7 points. The latter has been historically associated with a

575-bp midpoint for a composite high-yield bond spread.

DEFAULTS

December 2020’s U.S. high-yield default rate of 8.4% was up from December 2019’s 4.3%. The recent

average high-yield EDF metric of 2.36% portend a less-than-4% default rate by 2021’s final quarter.

US CORPORATE BOND ISSUANCE

Fourth-quarter 2019’s worldwide offerings of corporate bonds revealed annual advances of 9% for IG and

330% for high-yield, wherein US$-denominated offerings dipped by 0.8% for IG and surged higher by 331%

for high yield.

First-quarter 2020’s worldwide offerings of corporate bonds revealed annual advances of 14% for IG and 19%

for high-yield, wherein US$-denominated offerings increased 45% for IG and grew 12% for high yield.

Second-quarter 2020’s worldwide offerings of corporate bonds revealed annual surges of 69% for IG and

32% for high-yield, wherein US$-denominated offerings increased 142% for IG and grew 45% for high yield.

Third-quarter 2020’s worldwide offerings of corporate bonds revealed an annual decline of 6% for IG and an

annual advance of 44% for high-yield, wherein US$-denominated offerings increased 12% for IG and soared

upward 56% for high yield.

Fourth-quarter 2020’s worldwide offerings of corporate bonds revealed an annual decline of 3% for IG and an

annual advance of 8% for high-yield, wherein US$-denominated offerings increased 16% for IG and 11% for

high yield.

For 2019, worldwide corporate bond offerings grew 5.8% annually (to $2.456 trillion ) for IG and advanced

51.6% for high yield (to $570 billion ). The annual percent increases for 2020’s worldwide corporate bond

offerings are 19.7% (to $2.940 trillion ) for IG and 23.9% (to $706 billion ) for high yield. The expected annual

declines for 2021’s worldwide rated corporate bond issuance are 16% for investment-grade and 3% for high-

yield.

US ECONOMIC OUTLOOK

Unacceptably high unemployment and other low rates of resource utilization will rein in Treasury bond yields.

As long as the global economy operates below trend, 1.25% will serve as the upper bound for the 10-year
Treasury yield. Until COVID-19 risks fade substantially, wider credit spreads are possible. For now, the
corporate credit market has priced in the widespread distribution of a COVID-19 vaccine by mid-2021.

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FEBRUARY 11, 2021

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CAPITAL MARKETS RESEARCH

The Long View

d

Europe

By Ross Cioffi of Moody’s Analytics

February 11, 2021

GERMANY

Germany’s Federal Statistical Office reported that business insolvencies were down 26% y/y in November, but to

be blunt, insolvency figures have not had much meaning this past year. Policies in Germany, and elsewhere in

Europe, have been directed at preventing bankruptcies. In Germany, for example, the government suspended the

obligation for overindebted firms to file for insolvency until 31 December 2020. The obligation to file has been

suspended again for firms that are still waiting on transfers from the government. The delay was accompanied by

the ongoing short-time work scheme, which has the federal government paying a share of the wages that

employees miss by having their hours cut. This allows firms to cut hours instead of laying off workers. Such

measures to reduce the burden of operating costs have also helped firms avoid insolvency.

The rationale behind these policies is that many firms facing insolvency are not fundamentally unsound,

uncompetitive or obsolete. It is the massive external shock of the pandemic that has forced insolvency upon them.

Such policies are not meant as a sort of necromancy, but they will inevitably lead to the creation of some zombie

firms; that is, firms that without support are unable to survive. Once this support ends, we expect a wave of

insolvencies to follow. This is why we still suspect that unemployment hasn’t yet peaked in Germany. By the time

stimulus policies wind down, however, we hope that demand will have recovered enough to keep those firms in

business that without the pandemic would otherwise succeed, and to support the quick reabsorption of workers

who lost their jobs.

Headline consumer prices in Germany rose by 1% y/y in January, the first uptick since June. Meanwhile, core

inflation edged up to 1.4% y/y from 0.4%. Regarding the headline component, Brent crude prices have supported

energy price dynamics softening the year-on-year declines in heating oil and motor fuel prices. Furthermore, prices

for natural gas and electricity exceeded January 2020 levels. As we progress through 2021, we expect to see

sustained growth in household energy and fuel prices, which will put upward pressure on Germany’s headline

inflation rate.

Dutch inflation heats up

In the Netherlands, inflation picked up to 1.6% y/y in January from 1% in December. A 1.2-percentage point rise in

the inflation rate for housing drove the acceleration, but softer declines in energy and transport prices helped buoy

the headline figure. Core inflation, which excludes food and energy prices, reached a six-month high of 1.7% y/y.

The same caveats apply here as elsewhere in the euro zone, however. Although the updated methodology hasn’t

been published yet, we suspect some of the stronger inflation will be traceable to re-weighting for 2021, namely

less weight on pandemic-stricken goods and services like airfares.

Draghi on his way to premiership

After a second round of negotiations, it has become clear that Mario Draghi will garner enough support from the

Italian parliament to form a government that will take Italy through to the end of the pandemic. The only party

that will remain out of the majority will be the far-right Brothers of Italy party. Draghi has made clear that he will

focus the government on all things pandemic related. However, in a country in desperate need of structural reform,

there is little Draghi can do without the need to implement touchy reforms. The previous government fell on the

lack of consensus and political will to pursue such reforms. There are reforms explicitly required by the European

Commission, such as a reform of the civil law system, which continually ranks as one of the slowest in Europe, and

those implicitly needed to enact the green and digital investments that the recovery plan aims at. One of the

appeals of a technocratic government is to push through such necessary reforms, so we are hopeful that in Draghi’s

tenure, Italy will have more success in doing so.

Riksbank on hold

Sweden’s Riksbank’s one-week repurchase rate was unchanged at 0% at Wednesday's monetary policy meeting.

Furthermore, the total envelope value of its asset purchase program remains at SEK700 billion . The most recent

estimate from December reported that at 0.5% y/y, CPI inflation remains far below the Riksbank’s 2% target as the

pandemic continues to suppress demand. However, according to the two- and five-year SEK zero coupon inflation

swap rates, market expectations have already recovered. But as long as the pandemic generates such deep

uncertainty and weakness in the economy, the Riksbank will maintain its more dovish approach.

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FEBRUARY 11, 2021

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CAPITAL MARKETS RESEARCH

The Long View

d

Asia Pacific

By Denise Cheok and Shahana Mukherjee of Moody’s Analytics

February 11, 2021

MALAYSIA

Malaysia’s December quarter performance disappointed, as GDP fell by a stronger than expected 3.4% in

yearly terms, largely reversing the gains from the strong third quarter rebound, when restrictions were briefly

lifted. This brought the full-year GDP contraction to 5.6% in 2020, the worst since the 1998 Asian financial

crisis. Although this reading is comparable with the contractions seen in most Southeast Asian countries thus

far, the renewed health crisis has dragged the Malaysian economy down from its pole position in the previous

quarter.

On the production side, manufacturing supported growth, largely benefitting from the robust external

demand for electrical products. This sector is expected to lead the recovery into 2021, although a surge of

new COVID-19 cases in the region might temper the marginal gains. Services, which make up almost 60% of

the economy, continued to slump from the dearth of tourism. Domestic travel initially picked up after

restrictions were lifted in June, but increased lockdown measures in the last three months of the year have put

downward pressure on food and accommodation, as well as on wholesale and retail trade. While mining

continued to decline, the fall in oil prices from 2020 has started to taper off. Optimism surrounding vaccine

rollouts and supply cuts by OPEC have buoyed oil prices to near pre-pandemic levels, and we expect mining

to gradually pick up in 2021.

On the expenditure side, the fall in private consumption expectedly deepened in the December quarter.

Household spending accounts for more than half of the country’s GDP, and while robust fiscal measures have

cushioned some of the downturn, domestic spending will likely pick up only when the health crisis

substantially eases. Spending has so far leaned towards essential goods, while restrictions on dining out and

recreational activity have weighed on other activities.

Malaysia’s performance in 2020 was mixed. While it suffered from the COVID-19 pandemic like the rest of

the region, the economy suffered an additional hit from low oil prices since the country is a net oil exporter.

Its lockdown in the second quarter was one of the harshest in the region, but swift policy actions led to a

strong turnaround in the third quarter. The country’s economic trajectory in 2021 will critically depend on

how effectively it manages the domestic health crisis through vaccine rollouts, its policy support to counter

the demand deficit, and the global economic recovery from the pandemic.

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14

FEBRUARY 11, 2021

CAPITAL MARKETS RESEARCH / MARKET OUTLOOK / MOODYS.COM

CAPITAL MARKETS RESEARCH

Ratings Round-Up

Ratings Round-Up

European Change Activity Weakens

By Michael Ferlez

February 11, 2021


The positive trend in U.S. rating change activity continued in the latest period. For the week ended February 9,
upgrades accounted for over two-thirds of total changes and affected debt. Rating change activity were

largely confined to speculative-grade companies and changes were split across a diverse set of industries. The

largest upgrade in terms of affected debt was Prestige Brands Inc, which saw its senior secured notes

upgraded to Ba2 and its existing senior unsecured notes upgraded to B2. In their rating action, Moody’s
Investors Service cited Prestige’s stable operating performance and noted its expectation for Prestige to

continue to generate meaningful cash flows and for the company’s financial leverage to improve. Meanwhile,
U.S. downgrades were headlined by TPC Group Inc., which saw its existing senior secured notes due 2024

downgrade to Caa2 from Caa1. In its rating action, Moody’s Investors Service cited the subordination of the
existing senior secured debt to new super priority notes for the downgrade.


European rating change activity weakened last week, with downgrades accounting for three of the four rating

changes but only 7% of affected debt. Speculative-grade companies accounted for all three downgrades of

the four rating changes. The United Kingdom accounted for two changes, with Germany and Norway each
recording one. The most notable change was made to Aker BP ASA, which saw the ratings on its senior

unsecured notes due in 2024, 2025, 2026, 2030 and 2031 upgraded to Baa3 from Ba1. Concurrent with the

upgrade, Moody’s Investors Service also withdrew Aker BP’s corporate family rating of Ba1 and probability of

default rating of Ba1-PD per its practice for corporates with investment-grade ratings.

FIGURE 1

Rating 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

Dec01

Feb05

Apr08

Jun11

Aug14

Oct17

Dec20

By Count of Actions

By Amount of Debt Affected

* Trailing 3-month average
Source: Moody's

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FEBRUARY 11, 2021

CAPITAL MARKETS RESEARCH / MARKET OUTLOOK / MOODYS.COM

CAPITAL MARKETS RESEARCH

Ratings Round-Up

FIGURE 2

Rating Key

BCF

Bank Credit Facility Rating

MM

Money-Market

CFR

Corporate Family Rating

MTN

MTN Program Rating

CP

Commercial Paper Rating

Notes

Notes

FSR

Bank Financial Strength Rating

PDR

Probability of Default Rating

IFS

Insurance Financial Strength Rating

PS

Preferred Stock Rating

IR

Issuer Rating

SGLR

Speculative-Grade Liquidity Rating

JrSub

Junior Subordinated Rating

SLTD

Short- and Long-Term Deposit Rating

LGD

Loss Given Default Rating

SrSec

Senior Secured Rating

LTCF

Long-Term Corporate Family Rating

SrUnsec

Senior Unsecured Rating

LTD

Long-Term Deposit Rating

SrSub

Senior Subordinated

LTIR

Long-Term Issuer Rating

STD

Short-Term Deposit Rating

FIGURE 3

Rating Changes: Corporate & Financial Institutions – US

Date

Company

Sector

Rating

Amount

($ Million)

Up/

Down

Old LTD

Rating

New

LTD

Rating

IG/SG

2/3/21 ASHTON WOODS USA, LLC

Industrial SrUnsec/LTCFR/PDR

755

U

Caa1

B2

SG

2/3/21

IRIDIUM COMMUNICATIONS INC.
-IRIDIUM SATELLITE LLC

Industrial

SrSec/BCF

/LTCFR/PDR

U

B1

Ba3

SG

2/4/21 CHEVRON CORPORATION-NOBLE ENERGY, INC. Industrial

SrUnsec

84

U

Baa3

Aa2

IG

2/4/21

PAREXEL INTERNATIONAL HOLDING LIMITED
-PAREXEL INTERNATIONAL CORPORATION

Industrial

SrSec/BCF

D

B1

B2

SG

2/5/21 TPC GROUP INC.

Industrial

SrSec

930

D

Caa1

Caa2

SG

2/5/21 AECOM

Industrial

SrSec/BCF

U

Ba1

Baa3

SG

2/5/21 GIGAMON INC.

Industrial

SrSec/BCF

/LTCFR/PDR

U

B3

B2

SG

2/5/21 FC COMPASSUS, LLC

Industrial

SrSec/BCF

D

B1

B2

SG

2/8/21

GRAFTECH INTERNATIONAL LTD .
-GRAFTECH FINANCE, INC.

Industrial

SrSec/BCF

/LTCFR/PDR

500

U

B1

Ba3

SG

2/8/21 BRISTOW GROUP INC.

Industrial

LTCFR/PDR

U

B2

B1

SG

2/8/21 CALCEUS ACQUISITION, INC.

Industrial

SrSec/BCF

/LTCFR/PDR

D

B2

B3

SG

2/8/21 PENNYMAC FINANCIAL SERVICES INC.

Financial

SrUnsec/LTIR

650

U

B2

B1

SG

2/8/21 FORM TECHNOLOGIES LLC

Industrial

LTCFR/PDR

U

Caa2

B3

SG

2/8/21 ENTERPRISE DEVELOPMENT AUTHORITY (THE)

Industrial

LTCFR/PDR

U

Caa1

B3

SG

2/9/21

PRESTIGE CONSUMER HEALTHCARE, INC.
-PRESTIGE BRANDS, INC.

Industrial

SrUnsec/SrSec

/BCF/LTCFR/PDR

1,000

U

B3

B2

SG

2/9/21

PC NEXTCO HOLDINGS, LLC
-PARTY CITY HOLDINGS INC.

Industrial

SrSec/BCF

162

U

Caa2

Caa1

SG

2/9/21 PERATON CORP.

Industrial

LTCFR/PDR

U

B3

B2

SG

Source: Moody's

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FEBRUARY 11, 2021

CAPITAL MARKETS RESEARCH / MARKET OUTLOOK / MOODYS.COM

CAPITAL MARKETS RESEARCH

Ratings Round-Up

FIGURE 4

Rating Changes: Corporate & Financial Institutions – Europe

Date

Company

Sector

Rating

Amount

($ Million)

Up/

Down

Old

LTD

Rating

New

LTD

Rating

IG/SG Country

2/4/21 AKER BP ASA

Industrial

SrUnsec

4,000

U

Ba1

Baa3

SG

NORWAY

2/4/21 FERROGLOBE PLC

Industrial

PDR

D

Caa1

Ca

SG

UNITED

KINGDOM

2/5/21 RAFFINERIE HEIDE GMBH

Industrial SrSec/LTCFR/PDR

301

D

Caa1 Caa2

SG

GERMANY

2/5/21

AMIGO HOLDINGS PLC
- AMIGO LOANS GROUP LTD

Financial

LTCFR

D

B3

Caa1

SG

UNITED

KINGDOM

Source: Moody's

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17

FEBRUARY 11, 2021

CAPITAL MARKETS RESEARCH / MARKET OUTLOOK / MOODYS.COM

CAPITAL MARKETS RESEARCH

Market Data

Market Data

Spreads

0

200

400

600

800

0

200

400

600

800

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Spread (bp)

Spread (bp)

Aa2

A2

Baa2

Source: 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 2017 2018 2019 2020 2021

Spread (bp)

Spread (bp)

Ba2

B2

Caa-C

Source: Moody's

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

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18

FEBRUARY 11, 2021

CAPITAL MARKETS RESEARCH / MARKET OUTLOOK / MOODYS.COM

CAPITAL MARKETS RESEARCH

Market Data

CDS Movers

CDS Implied Rating Rises
Issuer

Feb. 10

Feb. 3

Senior Ratings

American Express Credit Corporation

Aa2

A1

A2

Burlington Resources LLC

Aa3

A2

A3

Ford Motor Credit Company LLC

Ba2

Ba3

Ba2

International Business Machines Corporation

A2

A3

A2

Occidental Petroleum Corporation

B3

Caa1

Ba2

NextEra Energy Capital Holdings, Inc.

Baa1

Baa2

Baa1

Sempra Energy

A2

A3

Baa2

Southwest Airlines Co.

Baa3

Ba1

Baa1

Pioneer Natural Resources Company

Baa2

Baa3

Baa2

Eastman Chemical Company

Baa1

Baa2

Baa3

CDS Implied Rating Declines
Issuer

Feb. 10

Feb. 3

Senior Ratings

International Paper Company

A2

Aa3

Baa2

Entergy Corporation

Aa3

Aa1

Baa2

Verizon Communications Inc .

Baa2

Baa1

Baa1

John Deere Capital Corporation

Baa2

Baa1

A2

Exxon Mobil Corporation

A2

A1

Aa1

Merck & Co., Inc.

Aa3

Aa2

A1

Union Pacific Corporation

Aa1

Aaa

Baa1

General Motors Company

Ba1

Baa3

Baa3

Cox Communications, Inc.

Baa1

A3

Baa2

Waste Management, Inc.

Baa2

Baa1

Baa1

CDS Spread Increases
Issuer

Senior Ratings

Feb. 10

Feb. 3

Spread Diff

United States Steel Corporation

Caa2

441

401

41

Nordstrom, Inc.

Baa3

291

273

18

DPL Inc.

Ba1

353

336

18

Commercial Metals Company

Ba2

293

277

16

First Industrial, L.P .

Baa2

245

232

13

Univision Communications Inc .

Caa2

433

422

11

Pactiv Corporation

Caa1

293

282

11

Entergy Corporation

Baa2

38

30

9

Service Corporation International

Ba3

164

156

8

JetBlue Airways Corp.

Ba3

555

547

8

CDS Spread Decreases
Issuer

Senior Ratings

Feb. 10

Feb. 3

Spread Diff

Nabors Industries, Inc .

Caa2

1,037

1,257

-220

K. Hovnanian Enterprises, Inc .

Caa3

933

1,138

-205

United Airlines Holdings, Inc.

Ba3

497

577

-79

Murphy Oil Corporation

Ba3

425

481

-56

Occidental Petroleum Corporation

Ba2

297

351

-54

L Brands, Inc.

B2

187

227

-40

Goodyear Tire & Rubber Company (The)

B2

257

297

-40

Ford Motor Credit Company LLC

Ba2

164

202

-39

Talen Energy Supply, LLC

B3

1,069

1,108

-39

American Axle & Manufacturing, Inc .

B2

360

398

-38

Source: Moody's, CMA

CDS Spreads

CDS Implied Ratings

CDS Implied Ratings

CDS Spreads

Figure 3. CDS Movers - US ( February 3, 2021 – February 10, 2021)

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FEBRUARY 11, 2021

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CAPITAL MARKETS RESEARCH

Market Data

CDS Implied Rating Rises
Issuer

Feb. 10

Feb. 3

Senior Ratings

Spain, Government of

Aa2

A1

Baa1

Natixis

Aa1

Aa2

A1

UniCredit Bank AG

Aa1

Aa2

A2

Swedbank AB

Aa1

Aa2

Aa3

Vodafone Group Plc

A3

Baa1

Baa2

Total SE

Aa1

Aa2

Aa3

Bayerische Motoren Werke Aktiengesellschaft

A2

A3

A2

SEB AB

Aa1

Aa2

Aa2

Volkswagen Aktiengesellschaft

Baa2

Baa3

A3

HSBC Bank plc

Aa1

Aa2

A1

CDS Implied Rating Declines
Issuer

Feb. 10

Feb. 3

Senior Ratings

Landesbank Hessen-Thueringen GZ

Baa2

Baa1

Aa3

Anheuser-Busch InBev SA /NV

Baa1

A3

Baa1

KBC Bank N.V.

Aa2

Aa1

Aa3

Banca Monte dei Paschi di Siena S.p.A.

Ba3

Ba2

Caa1

FCE Bank plc

Ba3

Ba2

Ba2

Credit Suisse AG

A2

A1

Aa3

Atlantia S.p.A.

Ba3

Ba2

Ba3

Bank of Scotland plc

A2

A1

A1

National Bank of Greece S.A.

B3

B2

Caa1

Ardagh Packaging Finance plc

B1

Ba3

Caa1

CDS Spread Increases
Issuer

Senior Ratings

Feb. 10

Feb. 3

Spread Diff

Deutsche Lufthansa Aktiengesellschaft

Ba2

313

300

13

Sappi Papier Holding GmbH

Ba2

354

341

13

Permanent tsb p.l.c.

Baa2

220

211

9

Alpha Bank AE

Caa1

423

417

7

Boparan Finance plc

Caa1

586

581

5

Stena AB

Caa1

633

627

5

EWE AG

Baa1

110

106

4

3i Group plc

Baa1

97

93

4

Stagecoach Group Plc

Baa3

80

76

4

Anheuser-Busch InBev SA /NV

Baa1

49

46

3

CDS Spread Decreases
Issuer

Senior Ratings

Feb. 10

Feb. 3

Spread Diff

TUI AG

Caa1

730

765

-35

Novafives S.A.S.

Caa2

882

916

-34

Iceland Bondco plc

Caa2

337

370

-32

Casino Guichard-Perrachon SA

Caa1

585

613

-28

CMA CGM S.A.

Caa1

408

427

-19

Telecom Italia S.p.A.

Ba2

159

174

-14

Jaguar Land Rover Automotive Plc

B1

387

401

-14

Ziggo Bond Company B.V .

B3

198

210

-12

RCI Banque

Baa2

172

182

-10

Avon Products, Inc.

B1

214

224

-10

Source: Moody's, CMA

CDS Spreads

CDS Implied Ratings

CDS Implied Ratings

CDS Spreads

Figure 4. CDS Movers - Europe ( February 3, 2021 – February 10, 2021)

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CAPITAL MARKETS RESEARCH

Market Data

Issuance

0

700

1,400

2,100

2,800

0

700

1,400

2,100

2,800

Jan Feb Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Issuance ($B)

Issuance ($B)

2018

2019

2020

2021

Source:

Moody's / Dealogic

Figure 5. Market Cumulative Issuance - Corporate & Financial Institutions: USD Denominated

0

200

400

600

800

1,000

0

200

400

600

800

1,000

Jan Feb Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Issuance ($B)

Issuance ($B)

2018

2019

2020

2021

Source:

Moody's / Dealogic

Figure 6. Market Cumulative Issuance - Corporate & Financial Institutions: Euro Denominated

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FEBRUARY 11, 2021

CAPITAL MARKETS RESEARCH / MARKET OUTLOOK / MOODYS.COM

CAPITAL MARKETS RESEARCH

Market Data

Investment-Grade

High-Yield

Total*

Amount

Amount

Amount

$B

$B

$B

Weekly

53.769

11.219

67.127

Year-to-Date

211.396

89.171

311.011

Investment-Grade

High-Yield

Total*

Amount

Amount

Amount

$B

$B

$B

Weekly

16.197

2.791

20.558

Year-to-Date

91.574

20.156

114.651

* Difference represents issuance with pending ratings.

Source: Moody's/ Dealogic

USD Denominated

Euro Denominated

Figure 7. Issuance: Corporate & Financial Institutions

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22

FEBRUARY 11, 2021

CAPITAL MARKETS RESEARCH / MARKET OUTLOOK / MOODYS.COM

CAPITAL MARKETS RESEARCH

Moody’s Capital Markets Research recent publications

Prices Rise Here, There and Everywhere (Capital Market Research)
Investment-Grade Bond Offerings to Slow from 2020’s Torrid Pace (Capital Market Research)
Not All Debt Is Equal ( Capital Market Research )
Market Value of U.S. Common Stock Soars to Record-High 185% of GDP (Capital Market Research)
Stimulatory Monetary and Fiscal Policies Enhance Corporate Credit Outlook (Capital Market Research)
Financial Markets Have Largely Priced-In 2021’s Positive Outlook (Capital Market Research)
Core Profits and U.S. Equities Set New Record Highs (Capital Market Research)
Operating Leverage May Help to Narrow Yield Spreads in 2021 (Capital Market Research)
Resurgent COVID-19 Threatens Corporate Credit’s Improved Trend (Capital Market Research)
Split Congress Sparks Rallies by Equities, Corporates and Treasuries (Capital Market Research)
Credit Disputes Equities Gloom ( Capital Market Research )
Corporate Cash Outruns Corporate Debt (Capital Market Research)
Profits Give Direction to Downgrades and Defaults (Capital Market Research)
Markets Sense an Upturn Despite Pockets of Profound Misery (Capital Market Research)
Record-High Bond Issuance Aids Nascent Upturn (Capital Market Research)
Corporate Bond Issuance Boom May Steady Credit Quality, On Balance (Capital Market Research)
Markets, Bankers and Analysts Differ on 2021’s Default Rate (Capital Market Research)
Corporate Credit Mostly Unfazed by Equity Volatility ( Capital Market Research )
Record August for Bond Issuance May Aid Credit Quality ( Capital Market Research )
Fed Policy Shift Bodes Well for Corporate Credit ( Capital Markets Research )
Markets Avoid Great Recession’s Calamities ( Capital Markets Research )
Liquidity Surge Hints of More Upside Surprises (Capital Markets Research)
Unprecedented Stimulus Lessens the Blow from Real GDP’s Record Dive (Capital Markets Research)
Ultra-Low Bond Yields Buoy Corporate Borrowing ( Capital Markets Research )
Record-High Savings Rate and Ample Liquidity May Fund an Upside Surprise ( Capital Markets Research )
Unprecedented Demographic Change Will Shape Credit Markets Through 2030 (Capital Markets Research)
Net High-Yield Downgrades Drop from Dreadful Readings of March and April (Capital Markets Research)
Long Stay by Low Rates Fuels Corporate Debt and Equity Rallies (Capital Markets Research)
Why Industrial (Warehouse) Will (Likely) Fare Better (Capital Markers Research)
CECL Adoption and Q1 Results Amid COVID-19 ( Capital Markets Research )
Continued Signs of Weakness in US Non-Agency RMBS (Capital Markets Research)
COVID-19 and Distress in CMBS Markets ( Capital Markets Research )
Record-Fast Money Growth Eases Market Anxiety ( Capital Markets Research )
Default Outlook: Markets Appear Less Worried than Credit Analysts ( Capital Markets Research )

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FEBRUARY 11, 2021

CAPITAL MARKETS RESEARCH / MARKET OUTLOOK / MOODYS.COM

CAPITAL MARKETS RESEARCH

To order reprints of this report (100 copies minimum), please call 212.553.1658 .

Report Number: 1265710

Contact Us

Editor

Reid Kanaley

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CAPITAL MARKETS RESEARCH

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