SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 8 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 ReportGreek Bailout: Deal Or No Deal? Global market-based measures of credit risk have been elevated since the beginning of 2015 amid lingering concerns about the ability of the cash-strapped Greek government to repayits debt, volatile oil prices, and conflicts in Ukraine and the Middle East. Sovereign EDFTM (Expected Default Frequency) 1 metrics, which measure the expected probability of default over a one year time horizon, increased in three of five global regions over the past week, with Latin America recording the highest weekly rise in the average risk of default (Figure 1). On June 3, Greek Prime minister Alexis Tsipras was able to come to agreement with its international lenders over new budget targets, yet rejected further pensions cuts and a value-added tax increase. On June 5, Greece was not able to reach a deal with its international creditors and skipped a ª300 million payment to the International Monetary Fund (IMF). According to the IMF, Greek authorities have exercised an option to delay the entire amount of ª1.6 billion due this month until June 30.Greeces Sovereign EDF 2 measure has shown some deterioration over the past week, rising from 5.78% to 6.01% (see Figure 2 below). The worsening in the market-based probability of default suggests that investors are not confident that the Greek government will reach a bailout financing deal with its creditors anytime soon. Greeces probability of default remains the third highest of all sovereigns in our dataset, following Ukraines and Venezuelas Sovereign EDF measures of 50% and 20%, respectively.FIGURE 1: AVERAGE WEEKLY CHANGE IN SOVEREIGN...
