FINANCIAL INSTITUTIONSISSUER COMMENT 11 May 2016RATINGSUBS AG (UBS) Moodys SR Unsecured Rating A1Moodys Outlook STABond-Implied Rating A2CDS-Implied Rating A3EDF-Implied Rating Ba2As of May 9, 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 ReviewUBSs Market-Implied Ratings Deteriorate UBSs three market-implied ratings worsened over the last 90 days and are all below their best recent observations.The bond- and CDS-implied ratings discussed in this report are for UBS Group AG's lead banking subsidiary UBS AG (UBS). The EDF-implied rating is for the parent holding company, UBS Group AG (UBSG).FIGURE 1. UBS: MOODYS AND MARKET-IMPLIED RATINGS LAST 90 DAYS (DAILY DATA)The bond-implied rating dropped by three notches from its strongest point to A2 (Figure 1).The CDS-implied rating varied over the last three months from a peak of A2 to a low point of Baa1. It dropped from A2 on April 28 to A3, where it remains since that date. However, it progressed by three notches from its lowest observation over the last five years of Baa3 in October of 2012.MOODY'S ANALYTICS FINANCIAL INSTITUTIONS2 11 May 2016 Market Signals Review: UBSs Market-Implied Ratings DeteriorateThe EDF'-implied rating for UBSG reached its most recent apex of Baa3 in late April and early May. After May 2 it weakened to Baa2 where it has been for the last several days. Over the last three years the EDF-implied rating has mostly fluctuated between Baa2 and A1.Readers will recall that when an implied rating weakens, the underlying securities have underperformed the broad market.Our ratings gap-conditioned transition matrices (available on Moodys CreditView) show that historically the bonds of a company rated A1 with a bond-implied ratings gap of -1 notc...
