SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 7 November 2016ContactsGlenn Levine 212-553-9595Assc Dir-Sr Research Analyst glenn.levine@moodys.comXian Li 1.212.553.1404Senior 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 ReportLebanons Sovereign Risk Eases With the Election of a New President Lebanons sovereign credit risk measures began to ease in the week ended November 4, following the installation of a new president after more than two years of political gridlock.In 2016, Lebanons five-year sovereign EDF (Expected Default Frequency)1 measure has been one of the worst performing in our database of 69 sovereigns, rising from 0.98% at the start of the year to a peak of 1.88% on November 1st, before easing to 1.82% on November 4th. This latest figure maps to an implied rating of B2, which aligns with its Moodys Investors Service rating after it was downgraded in late-2014. The upward trend in Lebanons sovereign EDF has been driven by rising CDS spreads, with the five-year spread increasing from 424 basis points at the start of the year to the most recent figure of 515 basis points.Exhibit 1Lebanons One- and Five-Year Sovereign EDF Measures (%)Source: CreditEdgeMOODY'S ANALYTICS SOVEREIGN AND SUPRANATIONAL2 7 November 2016 Sovereign Risk Report: Lebanons Sovereign Risk Eases With the Election of a New PresidentElections in April 2014 failed to elect a new leader, leaving it without a president from then until October 31st. Meanwhile, the countrys debt fundamentals remained weak, with government debt at 130% of GDP and a fiscal budget deficit around 8% of GDP. Fresh leadership may help to lower Lebanons sovereign risk. A note from Moodys Investors Service highlighted that The election would be credit positive for the sovereign if other cross-party agreements on economic an...
