SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 19 September 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 ReportRecovery Roadblocks Raise Greek Sovereign Risk Measures Greeces ability to implement the reforms that were a condition of last years rescue package may be causing yet another rift between the country and its creditors. Greeces Sovereign EDFTM (Expected Default Frequency)1 metric, which measures the expected probability of default over a five year time horizon, has declined since the country reached a bailout agreement with its creditors in mid-2015 (see Exhibit 1). In May 2016, the Eurozone finance ministers approved a tranche of bailout funds totaling ª10.3 billion. That was to be the first payment of the third bailout package, which totals ª86 billion and extends through the end of 2018. Greeces five-year Sovereign EDF measure declined from 4.8% to 2.8% in the month of May alone. However, from the first tranche, only ª7.5 billion has been disbursed and the rest is expected to be paid this month. Concern over Greeces reform progress has been growing among Eurozone officials, as the country has implemented only two of the 15 reforms, in the areas of pensions and taxation. This may postpone further disbursement of the bailout money. Eurozone officials are demanding that Athens push on with plans to set up a new privatization fund, sell specific state assets, and restructure the countrys civil service. This uncertainty has weighed on the countrys credit risk, with its Sovereign EDF measure rising from 3.4% to its current 3.9% over the past two weeks. The next Eurozone officials meeting is planned for September 21.MOODY'S ANALYTICS SOVEREIGN AND SUPRANATIONAL2 19 September 2...
