CORPORATESISSUER COMMENT 23 NOVEMBER 2015THE HOME DEPOT, INC. (HD)Moodys Senior Unsecured Rating A2Moodys Outlook STABond-Implied Rating Aa3CDS-Implied Rating Aa3EDF-Implied Rating AaaAs of 11/20/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewHome Depot: Fixed Income Market-Implied Ratings Move in Different Directions Over the last 30 days, Home Depots two fixed income market-implied ratings have shown different trends. The bond-implied rating rose from A1 to Aa3, but the CDS-implied rating fell from Aa2 to Aa3 (Figure 1). The EDF-implied rating has been steadfast at Aaa over both the last 30 days and the last year.FIGURE 1. HOME DEPOT: MOODYS AND MARKET-IMPLIED RATINGS, LAST 30 DAYS (DAILY DATA)Home Depots bond-implied rating showed above average volatility over the last 12 months, which we attribute to some illiquidity in its bonds. It fluctuated from a peak of Aa3 to a low of Baa1. The CDS-implied rating for Home Depot is now Aa3, down by three notches from its recent peak of Aaa one year ago.MOODY'S ANALYTICS CORPORATES2 23 NOVEMBER 2015 MARKET SIGNALS REVIEW: HOME DEPOT: FIXED INCOME MARKET-IMPLIED RATINGS MOVE IN DIFFERENT DIRECTIONSAccording to our ratings gap-conditioned transition matrices, companies rated A2 with a bond-implied rating of Aa3 have outperformed the broad market 17% of the time over the following 12 months, matched the markets performance 9% of the time, and underperformed the broad market 74% of the time.As shown in Figure 2, the CDS-implied ratings gap was +3 notches one month ago and has fallen to +2 notches. The bond-implied ratings gap was +1 notch 30 days ago but has advanced to +2 notches at present. The EDF-implied ratings gap remained at +5 notches over the las...
