FINANCIAL INSTITUTIONSISSUER COMMENT 22 JULY 2015MORGAN STANLEY (MS)Moodys Senior Unsecured Rating A3Moodys Outlook STABond-Implied Rating A3CDS-Implied Rating Baa2EDF-Implied Rating Baa2As of 7/20/2015ANALYST 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.This report has been republished on 1 July 2015 with the correction to Outlook in the ratings box from POS to STA.Market Signals ReviewMorgan Stanley: Two Market-Implied Ratings Improve as Trading Recovers The EDFTM-implied rating and the bond-implied rating for Morgan Stanley both progressed over the last three months. The CDS-implied rating for the company is currently unchanged at Baa2.Morgan Stanleys bond-implied rating was Baa2 on May 20 and has now advanced by two notches to A3 (Figure 1). The EDF-implied rating for MS climbed by one notch to Baa2. These are the ratings highest levels in the past five years.FIGURE 1. MORGAN STANLEY: MOODYS AND MARKET-IMPLIED RATINGS 90 DAYS (DAILY OBSERVATIONS)MOODY'S ANALYTICS FINANCIAL INSTITUTIONS2 22 JULY 2015 MARKET SIGNALS REVIEW : MORGAN STANLEY: TWO MARKET-IMPLIED RATINGS IMPROVE AS TRADING RECOVERSAccording 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 markets performance 13% of the time, and underperformed the broad market 59% of the time.Readers will recall that when a market-implied rating rises, the underlying securities have outperformed the broad market.MSs market-implied ratings gaps reflect Moodys upgrade of the companys senior debt by two notches from Baa2 to A3 on May 28, 2015. The EDF-implied ratings gap moved f...
