SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 13 JULY 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 ReportMarkets Anticipated Greeces Eleventh Hour Deal Even as the Greek debt crisis drifted towards an endgame over the weekend, market-based signals suggested that a last-minute deal could be made to release additional bailout funds to the Greek government. The benchmark one-year Sovereign EDF' (Expected Default Frequency) 1 finished the week ending July 10 at 8.17%, after starting the week at 14.87% and hitting a mid-week peak of 25.95%. The five-year Sovereign EDF followed a similar trend, finishing the week at 11.70% after hitting 26.36% on Tuesday 2 .Sovereign risk in Greece remains high. Greece is the third riskiest sovereign in our database, after Ukraine and Argentina, and the implied rating on its one-year EDF is now Caa3, the third-lowest rating on offer. But even with the Greek government struggling to strike a new deal with creditors, the corollary of its 8% Sovereign EDF is that markets still put the probability of avoiding default at north of 90%. This contrasts sharply with much of the written commentary which, on balance, has recently put a better-than-even probability of Greece defaulting and dropping out of the Eurozone.FIGURE 1. GREECES ONE-AND FIVE-YEAR SOVEREIGN EDFA new proposalMOODY'S ANALYTICS SOVEREIGN AND SUPRANATIONAL2 13 JULY 2015 SOVEREIGN RISK REPORT : MARKETS ANTICIPATED GREECES ELEVENTH HOUR DEALSovereign risk measures eased through the week ended July 10 as details emerged of the latest proposal put forward by Greek Prime Minister Alex Tsipras. The offer largely resembled the deal emphatically rejected by Greek voters in a referendum a week ago, with no...
