CORPORATESISSUER COMMENT 7 DECEMBER 2015PETROLEOS MEXICANOS (PEMEX)Moodys Senior Unsecured Rating Baa1Moodys Outlook NEGBond-Implied Rating Ba1CDS-Implied Rating B2EDF-Implied Rating naAs of 12/4/2015ANALYST 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 ReviewPetroleos Mexicanos (PEMEX): Market-Implied Ratings Are at Five Year Lows The bond-implied rating for PEMEX has worsened to Ba1, matching its lowest level of the last five years. It also declined to Ba1 on multiple dates between December 2014 and February 2015.Pemexs CDS-implied rating was Baa3 five years ago (Figure 1). It briefly ascended to Baa1 on several dates in late 2011 and early 2012 and reached its five-year low point of B2 in October 2015. Since then it has hovered between B2 (where it stands today) and B1.FIGURE 1. PEMEX: MOODYS AND MARKET-IMPLIED RATINGS LAST FIVE YEARS (WEEKLY DATA)We do not publish an EDF'-implied rating for PEMEX.MOODY'S ANALYTICS CORPORATES2 7 DECEMBER 2015 MARKET SIGNALS REVIEW: PETROLEOS MEXICANOS (PEMEX): MARKET-IMPLIED RATINGS ARE AT FIVE YEAR LOWSThe sharp drop in global energy prices has weighed heavily on the market signals of energy companies such as PEMEX over the past several months.According to our ratings gap-conditioned transition matrices, companies rated Baa1 with a bond-implied rating of Ba1 outperformed the broad market 46% of the time over the following 12 months, matched the markets performance 11% of the time, and underperformed the broad market 44% of the time.Readers will recall that when a market-implied rating falls the underlying securities have underperformed the broad market. 1As shown in Figure 2, the market-implied ratings for PEMEX are each below their observations one year ago. The bond-im...
