SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 22 JUNE 2015ANALYST CONTACTSIrina Baron Asst Dir-Research Associate irina.baron@moodys.comXian Li 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 ReportEuropean Sovereign Credit Risk Measures Increase As Greek Impasse Continues Market-based measures of credit risk for European countries declined broadly over the past week, as Eurozone policy makers were unable to reach a compromise with the Greek officials during the Eurogroup meeting on June 18th. As a result, an emergency summit will take place on Monday June 22, just 8 days before Greeces ª1.53 billion payment to the International Monetary Fund (IMF) is due. Greece showed the sharpest one-week increase in credit risk,with its one-year Sovereign EDFTM (Expected Default Frequency) 1 measure almost doubling from 5.8% to 10.5%, followed by Spains increase from 0.01% to 0.02%. Other market based credit measures like CDS spread-implied and Bond-implied ratings remained relatively steady 2 . The average CDS-implied rating for European countries is Baa1, which is just one notch below its average Moodys rating of A3, and two notches below its average Bond-implied rating of A2.The average change in expected probabilities of default for sovereigns in other geographical regions was significantly different than for Europe. Latin America recorded the greatest weekly drop in the average risk of default (24.3%). Venezuela, Chile, and Mexico showed the strongest weekly improvements in that region. In the Asia-Pacific region, Indonesia, Malaysia, and Thailand experienced the greatest declines in their Sovereign EDF measures. In the Middle East&Africa, Kazakhstan, Pakistan, and Turkey led the group, resulting in an average 3% fall in the Sovereign EDF for the region.MOODY'S ANALYTICS SOVEREIGN AND SUPRANATIO...
