SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 24 AUGUST 2015ANALYST CONTACTSIrina Baron Asst Dir-Research Associate irina.baron@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 ReportRecovery Reduces Portuguese Sovereign Credit Risk More than a year after Portugal exited its three-year ª78 billion bailout program without requesting any additional financing from its European partners, the country has returned to economic growth. Unlike its larger European peers such as France, which has struggled to build momentum, the Portuguese economy grew 0.4% in the second quarter of 2015. The countrys five-year Sovereign EDF' (Expected Default Frequency) 1 ,2 , measure of credit risk has decreased noticeably since the beginning of this month, from 0.37% to 0.34% as of August 21 (Figure 1). However, with its high levels of debt and unemployment, Portugals Sovereign EDF measure is still greater than that of its peers like Ireland and France, whose respective measures of credit risk are 0.14% and 0.08%.By contrast, Russias isolation from the rest of Europe and falling oil prices continue to hurt its economic performance. Earlier this month, the countrys Federal State Statistics Service reported a second consecutive quarterly decline in its annual growth rate. Russias GDP shrank by 4.6% in the second quarter, more than doubling its 2.2% contraction in the second quarter. The countrys Sovereign EDF measure showed the largest increase in default risk among European countries over the past week, rising from 0.97% to 1.11%.FIGURE 1. FIVE-YEAR SOVEREIGN EDF MEASURE OF SELECTED EUROPEAN COUNTRIES (%)MOODY'S ANALYTICS SOVEREIGN AND SUPRANATIONAL2 24 AUGUST 2015 SOVEREIGN RISK REPORT : RECOVERY REDUCES PORTUGUESE SOVEREIGN CREDIT RISKPortugals Sovereign EDF measure declined to 0.3...
