Rising Leverage Heightens Rally's Risk (Capital Markets Research)

WEEKLY MARKET OUTLOOKSEPTEMBER 22, 2016CAPITAL MARKETS RESEARCHMoodys 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.Rising Leverage Heightens Rallys RiskCredit Markets Review and Outlook by John Lonski Rising Leverage Heightens Rallys Risk. ¯ FULL STORY PAGE 2The Week Ahead We preview economic reports and forecasts from the US, UK/Europe, and Asia/Pacific regions. ¯ FULL STORY PAGE 5The Long View Check our chart here for forecast summaries of key credit market metrics. Full updated stories, US$ high-yield bond issuance may grow by 8.5% annually in Q4-2016, begin on page 11. ¯ FULL STORY PAGE 11 Ratings Round-Up by Njundu Sanneh Leaning Favorably. ¯ FULL STORY PAGE 15 Market Data Credit spreads, CDS movers, issuance. ¯ FULL STORY PAGE 17 Moodys Capital Markets Research recent publications Links to commentaries on: Greece, worries, ECB, defaults, EDFs, Swiber, defaults, Mexico, stability, retail, Portugal, overvalued, Pakistan, productivity, gold, Venezuela, economy. ¯ FULL STORY PAGE 21Credit SpreadsInvestment Grade: Year-end 2016 spread to be close to its recent 146 bp. High Yield: After recent spread of 536 bp, it may approximate 605 bp by year-end 2016. Defaults US HY default rate: after August 2016s 5.7%, MoodysCredit Policy Group forecasts it near 4.5% by the summer of 2017. Issuance For 2016, US$-denominated IG bond issuance may increase by 6.7% to a record $1.415 trillion, while US$-priced high-yield bond issuance may sink by -11.0% to $315 billion.Click here for Moodys Credit Outlook, our sister publication containing Moodys rating agency analysis of recent news events, summaries of recent rating changes, and summaries of recent research.Moodys Capital Markets Research, Inc.Weekly Market Outlook Contributors: David W. Munves, CFA 1.212.553.2844 david.munves@moodys.com John Lonski 1.212.553.7144 john.lonski@moodys.com Ben Garber 1.212.553.4732 benjamin.garber@moodys.com Njundu Sanneh 1.212.553.4036 njundu.sanneh@moodys.com Yukyung Choi 1.212.553.0906 yukyung.choi@moodys.com Irina Baron 1.212.553.4307 irina.baron@moodys.com Franklin Kim 1.212.553.4419 franklin.kim@moodys.com Xian (Peter) Li1.212.553.1404 Xian.li@moodys.comMoody's Analytics/Europe: Tomas Holinka +420 ( 221) 666-384 Tomas.holinka@moodys.comMoody's Analytics/Asia-Pacific: Alaistair Chan +61 (2) 9270-8148 Alaistair.chan@moodys.comEditor Dana Gordon 1.212.553.0398 dana.gordon@moodys.comCAPITAL MARKETS RESEARCH2 SEPTEMBER 22, 2016 CAPITAL MARKETS RESEARCH, INC. / MARKET OUTLOOK / MOODYS.COMCredit Markets Review and OutlookCredit Markets Review and Outlook By John Lonski, Chief ...