SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 4 MAY 2015ANALYST CONTACTSGlenn Levine +Assc Dir-Sr Research Analyst glenn.levine@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 ReportLower Greek Sovereign Risk: Temporary Relief or Turning a Corner? Market-based measures of Greek sovereign risk eased in the week ending May 1st, after trending steadily higher for much of the past six months. The one-year Sovereign EDF' (Expected Default Frequency) 1 fell from 6.58% at the start of the week to 5.65% by weeks end, a relative decline of 14%. Greece was the most improved across the week in our sovereign database of 84 countries. Greeces five-year Sovereign EDF saw a similar decline from 5.93% to 5.28% throughout the week. The EDF-implied rating improved one notch from Caa3 to Caa2, although this is still comfortably within speculative grade and the third lowest rating applicable to an entity not yet in default. Nevertheless, after reporting several months of failed negotiations and a rising probability of the Greek government defaulting, this weeks improvement offers some evidence that Greeces prospects of paying its bondholders on time and in full may have finally turned a corner.FIGURE 1. GREECES ONE- AND FIVE-YEAR SOVEREIGN EDFTwo key developments shaped the weeks improvement. The first was a shuffling of Greeces bailout negotiating team. The Finance Minister, Yanis Varoufakis, who frequently ruffled feathers when negotiating with European creditors, has been sidelined, and Greeces chiefMOODY'S ANALYTICS SOVEREIGN AND SUPRANATIONAL2 4 MAY 2015 SOVEREIGN RISK REPORT : LOWER GREEK SOVEREIGN RISK: TEMPORARY RELIEF OR TURNING A CORNER?negotiator has been dropped, with more pragmatic and experienced hands taking their places. Stock markets showed an immediate and ...
