FINANCIAL INSTITUTIONSISSUER COMMENT 23 JULY 2015UBS AG (UBS)Moodys Senior (SRA) Rating A2Moodys Outlook STABond-Implied Rating A1CDS-Implied Rating A3EDF-Implied Rating A2As of 7/22/2015ANALYST 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.This report has been republished on 1 July 2015 with the correction to Outlook in the ratings box from POS to STA.Market Signals ReviewUBSs Market-Implied Ratings All Improve UBSs three market-implied ratings performed well over the last three months and all are higher.The bond-implied rating rose by two notches to A1 (Figure 1). The CDS-implied rating rose one notch, to A3. It has progressed by three notches from Baa3 in October of 2012. The EDF'-implied rating also moved up by one notch, to A2. Over the last three years the EDF-implied rating has fluctuated between Baa1 and A1.FIGURE 1. UBS: MOODYS AND MARKET-IMPLIED RATINGS LAST 90 DAYS (DAILY DATA)Readers will recall that when an implied rating improves, the underlying securities have outperformed the broad market.MOODY'S ANALYTICS FINANCIAL INSTITUTIONS2 23 JULY 2015 MARKET SIGNALS REVIEW : UBSS MARKET-IMPLIED RATINGS ALL IMPROVEOur ratings gap-conditioned transition matrices (available on Moodys CreditView) show that historically the bonds of a company rated A2 with a bond-implied ratings gap of +1 notch (in this case a bond-implied rating of A1) have outperformed the broad market 18% of the time in the following 12 months, matched the markets performance 7% of the time, and underperformed 75% of the time.Implied ratings gaps narrow or widen due to market price fluctuations, ratings changes, or both. The bond-implied ratings gap moved from -1 notch three months ago to +1 notch (Figure 2). The CDS-implied ratings gap moved from...
