SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 7 March 2016ContactsIrina Baron Asst Dir-Research AssociateMAirina.baron@moodys.comXian Li 212-553-1404Senior Research AnalystMAxian.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.In republication, South Africas Sovereign EDF measure, mentioned on page 2, was changed from 18% to 0.18%. In addition, the reason for the vulnerability of South Africas economy to the Fed rate hike was revised to the countrys persistent, although shrinking, current account deficit.Sovereign Risk ReportGreek Sovereign EDF Measures Rise On Migrant Crisis and Bailout DisputeTensions over migrant inflows in Europe appear to have broadly affected sovereign credit risk measures across the region. Countries along the Balkan borders are restricting the number of migrants allowed in, leaving 30,000 stranded in Greece. European Sovereign EDFTM (Expected Default Frequency)1 metrics, which measure the probability of default over a five year time horizon, were mixed over the past week. Austria and France showed some of the sharpest weekly increases, while Germany and Portugals five-year Sovereign EDF measures declined by 18% to 13%, respectively.Greeces Sovereign EDF measure had fallen significantly since its July 2015 peak of almost 26% (see Exhibit 1), as Greek lawmakers approved the bailout measures, including the condition that the country set up a fund to privatize ª50 billion in state-owned assets. Following the agreement, the European Central Bank (ECB) raised the ceiling on its emergency liquidity assistance (ELA) to Greek banks to nearly ª90 billion. In December, Greek banks boosted their capital by ª14.4 billion. Probabilities of default for the countrys three largest banks had declined somewhat from their peaks. Yet, the improving trend reversed itself in recent weeks as Greece and its creditors hit an...
