SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 25 April 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 ReportSaudi Arabias Credit Risk Eases as It Returns to Global Credit MarketsMarket price-based measures of credit risk for Saudi Arabia, one of the worlds largest oil producers, rose in January to their worst levels since 2009, as the countrys economy has been roiled by the plunge in oil prices. Since then crude oil prices have rebounded somewhat, from $30.77 per barrel to $43.75 per barrel as of April 22. Concurrently, Saudi Arabia, which relies on energy exports for more than 80% of its revenue, saw its five-year Sovereign EDFTM (Expected Default Frequency1) metric, which measures the expected probability of default over a five-year time horizon, improve from 0.69% on January 18 to its current level of 0.38% (Figure 1). The change in the countrys Sovereign EDF measure is in line with the overall easing in the credit risk sentiment among the 70 sovereign entities that we track. Still, as the probability of an adverse credit event for Saudi Arabia falls, the country faces liquidity pressures amid a prolonged period of low commodity prices. Saudi Arabias key interest rate, the three-month Saudi Interbank Offered Rate, also shown in Figure 1, rose to 1.73% in February, its highest level in six years.Exhibit 1Saudi Arabias Five-Year Sovereign EDF Measure vs 3-month Saudi Interbank Offered RateSource: CreditEdge, BloombergMOODY'S ANALYTICS SOVEREIGN AND SUPRANATIONAL2 25 April 2016 Sovereign Risk Report: Saudi Arabias Credit Risk Eases as It Returns to Global Credit MarketsLower oil and commodity prices have taken a toll on the countrys overall economy, as the oil and gas sector a...
