FINANCIAL INSTITUTIONSISSUER COMMENT 26 April 2016RATINGSMORGAN STANLEY (MS) Moodys SR Unsecured Rating A3Moodys Outlook STABond-Implied Rating A3CDS-Implied Rating Baa2EDF-Implied Rating Ba1As of April 23, 2016ContactsAllerton 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: One Market Signal Is Down, One Is Up The EDF'-implied rating for Morgan Stanley declined by one notch to Ba1 on February 5 and has been at that level ever since. The bond- and CDS-implied ratings are both at the same levels as three months ago. However, after first-quarter financial results were announced last week (please see Earnings Commentary below) the CDS-implied rating climbed by one notch from Baa3 to Baa2 on April 19.Morgan Stanleys bond-implied rating has been A3 since January 23 (Figure 1), except for a single day at A2 (March 4).The 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. MSs current five-year CDS mid-spread is 94 bp versus 96 bp for Goldman Sachs. One month ago MSs CDS spread was 113 bp and the CDS-implied rating was Baa3.FIGURE 1. MORGAN STANLEY: MOODYS AND MARKET-IMPLIED RATINGS LAST 90 DAYS (DAILY OBSERVATIONS)MOODY'S ANALYTICS FINANCIAL INSTITUTIONS2 26 April 2016 Market Signals Review: Morgan Stanley: One Market Signal Is Down, One Is UpFirst-quarter financial data released last week had no immediate effect on MSs bond- and EDF-implied ratings. Nor did the recent announcement by the Fed that MSs living will did not meet the requirements of the Dodd Frank law.According to our ratings gap-conditioned transition matrix, (shown under the Market Signals tab on Moodys CreditView), a company rated A3 with ...
