FINANCIAL INSTITUTIONSISSUER COMMENT 26 OCTOBER 2015MORGAN STANLEY (MS)Moodys Senior Unsecured Rating A3Moodys Outlook STABond-Implied Rating A2CDS-Implied Rating Baa2EDF-Implied Rating Baa3As of 10/22/2015ANALYST 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 ReviewMorgan Stanley: Bond-Implied Rating Rises The bond-implied rating for Morgan Stanley progressed over the last three months. The CDS-implied rating for the company was unchanged over the period at Baa2 and the EDF'-implied rating matches its level of 90 days ago at Baa3. Third-quarter 2015 financial results announced last week fell short of consensus expectations, but did not have any effect on the market-implied ratings.Morgan Stanleys bond-implied rating was A3 on July 22 and has now advanced to A2 (Figure 1), its highest level over the last five years.FIGURE 1. MORGAN STANLEY: MOODYS AND MARKET-IMPLIED RATINGS LAST 365 DAYS (DAILY OBSERVATIONS)MOODY'S ANALYTICS FINANCIAL INSTITUTIONS2 26 OCTOBER 2015 MARKET SIGNALS REVIEW: MORGAN STANLEY: BOND-IMPLIED RATING RISESThe Baa2 CDS-implied rating for Morgan Stanley matches its best level of the past five years, with the exception of a few days in late June 2014 when it was Baa1.The companys EDF-implied rating briefly climbed by one notch to Baa2 in early August, but has returned to Baa3 once again. The MS EDF-implied rating is also currently at its best level of the past five years, except for June and July 2015 when it was Baa2 on several days.According to our ratings gap-conditioned transition matrix, shown under the Market Signals tab on Moodys CreditView, a company rated A3 with a bond-implied rating of A3 outperformed the broad market 29% of the time in the following 12 months, matched the marke...
