SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 21 November 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 ReportLikely Fed Rate Hike and Oil Prices Grab Market Attention Global financial markets are focused on signs that the US Federal Reserve will lift its policy rate at its December 13-14 meeting. During congressional testimony on November 17, Fed Chair Janet Yellen noted that gains in the economy and the labor market continued to strengthen the case for raising rates. The US unemployment rate is at 4.9%, down from 10% in 2009. And the core PCE price index, which strips out food and energy costs, is growing at the two-year high rate of 1.7% year-on-year, though this is still below the Feds 2% target. Yellen also emphasized that if the rate increase was delayed, the Fed could end up having to tighten policy relatively abruptly. She asserted that holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability.Oil prices preoccupied investors, as well. Crude oil prices continued to recover this past week from their drop to the three-month low of $43.12 per barrel on November 9, amid renewed hopes for an OPEC production cut. The price of oil closed at $45.58 per barrel on November 18. The group of 14 oil producing nations is set to meet on November 30 to formalize a deal to curb production to between 32.5 million and 33 million barrels a day from the record level of 33.83 million barrels a day in October. Russian Energy Minister Alexander Novak and Venezuelan President Nicolas Maduro expressed their willingness to support decisions adopted by OPEC. Saudi Arabian Energy Minister Khalid Al-Falih stated that he...
