SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 15 JUNE 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 Signals Suggest Greece Wont Default, Even as Bailout Talks Break Down Market-based signals indicate that the risk of a Greek sovereign default eased slightly in the week ended June 12, even as talks among bailout negotiators appeared to break down. The one-year Sovereign EDF' (Expected Default Frequency) 1 was flat throughout most of the week, eventually finishing modestly higher at 6.18% compared to 6.01% at the beginning of the week 2 .The relative calmness in Greeces sovereign risk gauge contrasts with news and developments on the ground, which suggest that debt negotiations are nearing a crisis point. On Wednesday the IMF withdrew its negotiating team from Europe citing major differences and noting that we are well away from an agreement. European negotiators have always insisted that the IMF be a part of any further bailout agreement and their withdrawal, if permanent, would likely be terminal for any deal. The deadline to reach an agreement, meanwhile, is fast approaching. On June 30, four IMF loan repayments worth ª1.5 billion fall due. It is also the cutoff for the Greek government to tap the ª7.2 billion in withheld bailout funds; its unlikely that the government can make these repayments without additional assistance. A June 18 meeting of Eurozone finance ministers is now seen as the chance to strike a deal.MOODY'S ANALYTICS SOVEREIGN AND SUPRANATIONAL2 15 JUNE 2015 SOVEREIGN RISK REPORT : MARKETS SIGNALS SUGGEST GREECE WONT DEFAULT, EVEN AS BAILOUT TALKS BREAK DOWNFIGURE 1. GREECES ONE- AND FIVE-YEAR SOVEREIGN EDFHowever, this did not translate into simil...
