CROSS-SECTORSECTOR IN-DEPTH 12 July 2016ContactsDanielle Ferry 212-553-7781Sr Director-Research danielle.ferry@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.VIEWPOINTSMarket-Implied Credit Risk Two Weeks After the Brexit Vote Highlights¯ We use Expected Default Frequency (EDFTM) and CDS-Implied EDF (CDS-I-EDF) measures to assess the fallout of the Brexit vote for corporate credit risk at the two-week mark. This analysis focuses on UK companies in the banking, construction, and consumer products sectors.¯ Although in the first few days after the Brexit vote, default risk rose for many companies globally, the net impact after two weeks in the non-financial sectors has been almost exclusively one of deterioration for UK companies; credit risk remains higher for banks across the globe, albeit most dramatically for UK banks.¯ The degree to which the credit risk of UK companies has been impacted is uneven both across and within the sectors analyzed.Median One-Year EDF Measures for UK Companies, By SectorMOODY'S ANALYTICS CROSS-SECTOR2 12 July 2016 VIEWPOINTS: Market-Implied Credit Risk Two Weeks After the Brexit VoteIntroduction Since UK voters elected to exit the European Union on June 23, 2016, investor concerns about the countrys economic outlook have punished financial markets. As of July 8, the pound has plummeted by 12.7%, to levels not seen since the early 1980s, and the domestically-oriented FTSE 250 is down by 6.7%. On July 7, investors seeking safe havens pushed the yield on Japans 20-year government bond below zero for the first time. Both the volume and cost of credit default swaps on UK companies has surged.In this report, we use one-year Expected Default Frequency (EDFTM) and CDS-Implied EDF (CDS-I-EDF) measures to assess the fallout of the Brexit vote for corporate credit risk at the two-week mark. One-year ...
