SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 18 April 2016ContactsIrina Baron Asst Dir-Research Associate irina.baron@moodys.comXian Li 212-553-1404Senior Research Analyst xian.li@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.Sovereign Risk ReportChina Joins Broad Oil-Derived Decline In Global Sovereign Credit RiskGlobal market price-based measures of credit risk generally improved over the past week, as oil prices continued to rise. That development defied lingering concerns that oil producers will do little to restrict output at their much anticipated summit in Doha, Qatar on April 18. The worlds biggest oil exporters, including Russia and Saudi Arabia, were expected to finalize a deal aimed to freeze oil output at January levels. Despite elevated volatility in oil prices amid uncertainty over the summits outcome, crude oil ultimately surged from $35.46 per barrel on April 4 to a three-month high of $41.90 per barrel on April 12. The rise in oil prices was fueled by data reported by the US Energy Information Administration (EIA) last week that domestic output was at 9 million barrels per day in March, down 90,000 barrels per day compared with output in February. The summit ended without an agreement, after Saudi Arabia insisted that Iran also agrees to cap its oil production.Sovereign Expected Default Frequency1 (EDFTM) metrics, which measure the expected probability of default over a five year time horizon, fell in three of the five global regions over the past week. Latin America&the Caribbean recorded the highest weekly drop in the average risk of default (see Figure 1 below). Nine out of eleven countries with Sovereign EDFs in that region experienced a weekly decline in credit risk. Peru, Venezuela, and Panama led the group with the sharpest weekly declines in their probabilities of default. Korea, Japan, and Australia toppe...
