Mixed Market Reaction For Cyprus, Ireland: Market Signals Sovereign Risk

14 JANUARY 2013
CAPITAL MARKETS RESEARCH
MARKET SIGNALS SOVEREIGN RISK REPORT

Moodys Capital Markets Research, Inc. Authors
Jerry H. Tempelman, CFA Director 1.212.553.1434 Jerry.Tempelman@moodys.com Yukyung Choi Associate Director 1.212.553.0906 Yukyung.Choi@moodys.com
Mixed Market Reaction for Cyprus, Ireland

Market-based probabilities of default of many sovereign entities were roughly unchanged this past week, maintaining the small improvements of the previous week. The CDS-implied EDFTM (Expected Default Frequency) credit measures of most peripheral European nations were notably stable, with the exception of Cyprus. 1 The island nations cumulative 5-year EDF measure rose to 14.48%, up from 9.77% one month ago (Figure 1). Moodys Investors Service this past week downgraded Cypruss government bond rating from B3 to Caa3, expecting the countrys government debt burden to increase to 150% of GDP this year due to higher recapitalization needs of its banking system following the recent distressed exchange of Greek government debt and a deterioration in the loan portfolios of Cypriot banks. Figure 1. Five-year cumulative EDFTM measure of selected sovereign issuers
Cyprus 30% Portugal Spain Italy Ireland
About
Analyses 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. Read the CMRG FAQ capitalmarketsresearch@moodys.com
24%
18%
12%
6%
0% Jan10 Jul10 Jan11 Jul11 Jan12 Jul12 Jan13
CDS-implied EDFTM (Expected Default Frequency) credit measures are the markets collective assessment of the probability of default, extracted from observed credit default swap spreads and adjusted for loss-given default and the market price of risk.
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Elsewhere, Ireland successfully auctioned off 2.5 billion in new debt to mature in October 2017, yielding 3.316%. Approximately 87 percent of the issue was sold to foreign investors, according to Irelands National Treasury Management Agency. The new debt represents 25 percent of the NTMA funding target for this year, but effectively prefunds some of next years borrowing requirements, as Irelands borrowing needs for this year are covered by the financial rescue program Ireland entered into in 2010. In an Issuer Comment, Moodys Investors Service projected Irelands government debt-to-GDP ratio to stabilize around 120% in 20132014, while peaking at 140% if debt guaranteed by the countrys National Asset Management Agency is included. This past weeks auction was widely heralded as another step in the process of Ireland moving from official support back to market funding. Irelands bond- and CDS-implied ratings have increased steadily over the past two years (Figure 2). Recent improvements reflect the better fiscal situation but also an anticipation that Ireland will reach an agreement with European authorities to adjust the terms on a promissory note related to the rescue of the countrys banking system. Irelands market risk measures may well deteriorate somewhat if no such agreement is reached.
FIGURE 2
Moodys and Market-Implied Ratings Government of Ireland
Irelands unemployment rate, meanwhile, remains among the highest in Europe exceeded only by those of Spain, Greece, and Portugal. Figures reported by Eurostat for November show that European unemployment continued to deteriorate, despite the much-improved sentiment in financial markets this past year. For the euro area, aggregate unemployment increased from 11.7% in October to 11.8% in November. On a more positive note, Eurostat reported that retail sales in the euro area increased slightly in November from October but also that they remain 2.6% below those of a year earlier.
14 JANUARY 2013
MOODYS CAPITAL MARKETS RESEARCH, INC. / MARKET SIGNALS SOVEREIGN RISK REPORT / MOODYS.COM
Ten-year government yields declined sharply on Thursday after Spain sold almost 6 billion in government debt, a large amount than investors had expected. Spains ten-year yield fell below 5% for the first time since March of last year (Figure 3). The European Stability Mechanism auctioned off 1.927 billion in 3-month bills at a yield of -0.0324%. It was the ESMs first public issuance, but the program effectively replaces the bill program of the European Financial Stability Facility.
FIGURE 3
10-year generic government bond yields of selected countries

%
Portugal
Spain
Italy
Ireland
Netherlands
Germany
20
15
10
0 Jan10 Jul10 Jan11 Jul11 Jan12 Jul12 Jan13
Finally, the European Central Bank left its main monetary policy rates unchanged. Market participants had expected further monetary policy easing at some point in light of the still weak economic situation in Europe. But statements by ECB President Mario Draghi during this past weeks press conference were generally interpreted as indicating that no further monetary accommodation is likely to be forthcoming.
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Asia-Pacific
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Australia (75300) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating China (599085) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Hong Kong (375515) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Indonesia (405130) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Japan (423746) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Korea (440230) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Malaysia (460522) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.03% A2 Baa1 A3 0.03% A3 Baa1 A3 0.03% A3 Baa1 A3 0.03% A2 Baa1 A3 0.04% A3 A3 A3 0.13% Baa1 Baa1 A3 -9 bps +1 +1 0 0.03% A2 A2 Aa3 0.03% A2 A2 Aa3 0.03% A2 A2 Aa3 0.02% A2 A2 Aa3 0.03% A2 A2 Aa3 0.15% Baa2 A3 A1 -12 bps +3 +1 +1 0.04% A3 Aaa Aa3 0.04% A3 Aaa Aa3 0.04% A3 Aaa Aa3 0.04% A3 Aaa Aa3 0.04% A3 Aaa Aa3 0.13% Baa1 Aaa Aa3 -9 bps +1 0 0 0.06% Baa2 Baa2 Baa3 0.07% Baa2 Baa2 Baa3 0.07% Baa2 Baa2 Baa3 0.06% Baa2 Baa2 Baa3 0.07% Baa3 Baa2 Baa3 0.23% Baa3 Baa2 Ba1 -16 bps 0 0 +1 0.02% Aa2 Baa1 Aa1 0.02% Aa2 Baa1 Aa1 0.02% Aa2 A1 Aa1 0.02% Aa2 Baa1 Aa1 0.02% Aa2 Baa1 Aa1 0.07% A1 A3 Aa1 -5 bps +2 -1 0 0.02% A1 Aa3 Aa3 0.03% A2 A1 Aa3 0.03% A2 A1 Aa3 0.02% A1 Aa3 Aa3 0.03% A2 A2 Aa3 0.13% Baa1 Aa3 Aa3 -10 bps +2 -2 0 0.02% Aa2 Aaa Aaa 0.02% Aa3 Aaa Aaa 0.02% Aa3 Aaa Aaa 0.02% Aa3 Aaa Aaa 0.02% Aa3 Aaa Aaa 0.06% A1 Aaa Aaa -4 bps +1 0 0
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New Zealand (553700) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Philippines (607410) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Singapore (680430) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Sri Lanka (600023158) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Taiwan (732845) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Thailand (747330) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Vietnam (600023790) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.12% Ba1 Ba2 B2 0.13% Ba1 Ba2 B2 0.13% Ba1 Ba2 B2 0.11% Ba1 Ba2 B2 0.12% Ba1 Ba2 B2 0.67% Ba2 Ba3 B1 -55 bps +1 +1 -1 0.04% A3 Baa3 Baa1 0.04% Baa1 Baa3 Baa1 0.04% Baa1 Baa3 Baa1 0.04% Baa1 Ba1 Baa1 0.05% Baa1 Ba1 Baa1 0.19% Baa2 Baa3 Baa1 -14 bps +1 -1 0 0.04% A2 -Aa3 0.04% --Aa3 0.04% A3 -Aa3 0.04% A3 -Aa3 0.04% --Aa3 ---Aa3 ---0 0.42% B1 Ba2 B1 0.43% B1 Ba2 B1 0.34% Ba3 Ba2 B1 0.33% Ba3 Ba1 B1 0.34% B1 Ba2 B1 0.35% -Ba2 B1 -1 bps -0 0 ---Aaa ---Aaa ---Aaa ---Aaa ---Aaa 0.07% A2 -Aaa ---0 0.05% Baa1 A3 Ba1 0.05% Baa1 A3 Ba1 0.05% Baa1 A3 Ba1 0.04% Baa1 A3 Ba1 0.04% Baa1 A3 Ba1 0.16% Baa2 Baa1 Ba2 -12 bps +1 +1 +1 0.02% Aa2 -Aaa 0.02% Aa3 -Aaa 0.02% Aa3 -Aaa 0.02% Aa3 -Aaa 0.02% A1 -Aaa 0.07% A2 -Aaa -5 bps +1 -0
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Europe
Austria (76100) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Belgium (100220) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Bulgaria (126630) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Croatia (600020489) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Cyprus (377200) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Czech Republic (218505) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Denmark (230700) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.01% Aaa Aa1 Aaa 0.01% Aaa Aa1 Aaa 0.01% Aaa Aaa Aaa 0.01% Aaa Aa1 Aaa 0.01% Aaa Aa1 Aaa 0.12% Baa1 Aaa Aaa -11 bps +7 -1 0 0.03% A2 Aa3 A1 0.03% A2 Aa3 A1 0.03% A2 Aa3 A1 0.03% A2 Aa3 A1 0.03% A2 Aa3 A1 0.17% Baa2 A3 A1 -14 bps +3 +3 0 1.61% B3 Caa2 B3 2.71% Caa1 Caa3 B3 2.78% Caa2 Caa3 B3 2.30% Caa1 Caa3 B3 2.73% Caa2 Caa3 Caa3 4.70% Caa1 Caa2 Baa3 -197 bps -1 -1 -9 0.21% Ba2 Ba2 Baa3 0.20% Ba2 Ba2 Baa3 0.21% Ba2 Ba2 Baa3 0.19% Ba2 Ba2 Baa3 0.18% Ba2 Ba2 Baa3 1.36% B1 Ba3 Baa3 -118 bps 2 1 0 0.05% Baa1 Baa2 Baa2 0.04% Baa1 Baa2 Baa2 0.05% Baa1 Baa2 Baa2 0.04% Baa1 Baa1 Baa2 0.04% Baa1 Baa1 Baa2 0.72% Ba2 Ba1 Baa2 -68 bps +4 +3 0 0.03% A3 Aaa Aa3 0.03% A3 Aaa Aa3 0.04% A3 Aaa Aa3 0.03% A3 Aaa Aa3 0.03% A3 Aaa Aa3 0.47% Ba1 A3 Aa3 -44 bps +4 +6 0 0.01% Aa2 Aaa Aaa 0.01% Aa2 Aaa Aaa 0.02% Aa2 Aa1 Aaa 0.01% Aa2 Aaa Aaa 0.02% Aa3 Aaa Aaa 0.25% Baa3 Aa1 Aaa -23 bps +6 +1 0
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Estonia (600046984) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Finland (278070) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating France (639500) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Germany (333700) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Greece (348330) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Hungary (381030) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Iceland (392575) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.12% Baa3 Ba1 Baa3 0.12% Ba1 Ba1 Baa3 0.11% Baa3 Ba1 Baa3 0.11% Baa3 Ba1 Baa3 0.11% Ba1 Ba1 Baa3 0.45% Ba1 B1 Baa3 -34 bps 0 +3 0 0.25% Ba2 Ba3 Ba1 0.23% Ba2 Ba3 Ba1 0.23% Ba2 Ba3 Ba1 0.19% Ba2 Ba2 Ba1 0.21% Ba2 Ba3 Ba1 1.78% B2 B3 Ba1 -157 bps +3 +3 0 14.41% -Ca C 13.57% -C C 12.88% -C C --C C --C C 26.24% C C Ca --0 -1 0.02% Aa1 Aaa Aaa 0.02% Aa2 Aaa Aaa 0.02% Aa1 Aaa Aaa 0.02% Aa2 Aaa Aaa 0.02% Aa2 Aaa Aaa 0.08% A3 Aaa Aaa -6 bps +4 0 0 0.04% A3 Aaa Aa1 0.05% Baa1 Aaa Aa1 0.05% Baa1 Aaa Aa1 0.04% A3 Aaa Aa1 0.04% A3 Aaa Aa1 0.22% Baa3 Aaa Aaa -18 bps +3 0 -1 0.01% Aaa Aaa Aaa 0.01% Aaa Aaa Aaa 0.01% Aaa Aaa Aaa 0.01% Aaa Aaa Aaa 0.01% Aaa Aaa Aaa 0.05% Aa2 Aaa Aaa -4 bps +2 0 0 0.03% A2 -A1 0.03% A2 -A1 0.03% A2 -A1 0.03% A2 -A1 0.03% A2 -A1 0.13% Baa1 -A1 -10 bps +2 -0
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Ireland (423933) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Italy (423690) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Latvia (600016806) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Lithuania (600018187) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Malta (600012947) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Netherlands (543005) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Norway (565700) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.01% Aaa -Aaa 0.01% Aaa -Aaa 0.01% Aaa -Aaa 0.01% Aaa -Aaa 0.01% Aaa -Aaa 0.03% Aaa -Aaa -2 bps 0 -0 0.02% Aa2 Aaa Aaa 0.02% Aa2 Aaa Aaa 0.02% Aa2 Aaa Aaa 0.02% Aa3 Aaa Aaa 0.02% Aa3 Aaa Aaa 0.10% A3 Aaa Aaa -8 bps +3 0 0 0.20% Ba1 Baa2 A3 0.21% Ba2 Baa2 A3 0.20% Ba2 Baa2 A3 0.18% Ba1 Baa2 A3 0.18% Ba1 Baa2 A3 0.79% Ba2 A3 A2 -61 bps +1 -2 -1 0.05% Baa1 Baa1 Baa1 0.05% Baa1 Baa1 Baa1 0.05% Baa1 Baa1 Baa1 0.04% Baa1 Baa1 Baa1 0.05% Baa1 Baa2 Baa1 0.57% Ba1 Ba1 Baa1 -52 bps +3 +2 0 0.06% Baa2 Baa1 Baa3 0.05% Baa2 Baa1 Baa3 0.05% Baa2 Baa1 Baa3 0.05% Baa2 A3 Baa3 0.05% Baa2 Baa1 Baa3 0.55% Ba1 Baa3 Baa3 -50 bps +2 +2 0 0.23% Ba2 Ba1 Baa2 0.24% Ba2 Ba1 Baa2 0.25% Ba2 Ba1 Baa2 0.19% Ba2 Baa3 Baa2 0.16% Ba1 Baa3 Baa2 1.17% Ba3 Ba1 A2 -101 bps +2 +1 -3 0.13% Ba1 Ba1 Ba1 0.13% Ba1 Ba1 Ba1 0.13% Ba1 Ba1 Ba1 0.11% Ba1 Ba1 Ba1 0.10% Ba1 Ba1 Ba1 1.80% B2 Ba3 Ba1 -170 bps +4 +2 0
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Poland (613900) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Portugal (614650) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Romania (651437) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Russian Federation (600018921) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Serbia (600035271) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Slovakia (600011880) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Slovenia (600019535) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.23% Ba2 Ba2 Baa2 0.16% Ba1 Ba2 Baa2 0.16% Ba1 Ba2 Baa2 0.13% Ba1 Ba1 Baa2 0.14% Ba1 Ba1 Baa2 0.72% Ba2 Ba2 A1 -58 bps +1 +1 -4 0.05% Baa1 A2 A2 0.05% Baa1 A2 A2 0.05% Baa1 A2 A2 0.04% Baa1 A1 A2 0.04% Baa1 A1 A2 0.47% Ba1 Baa2 A1 -43 bps +3 +4 -1 0.55% ---0.39% ---0.40% ---0.37% ---0.37% ---0.74% ----37 bps ---0.08% Baa2 Baa1 Baa1 0.07% Baa2 A3 Baa1 0.08% Baa2 A3 Baa1 0.07% Baa2 A3 Baa1 0.07% Baa2 Baa1 Baa1 0.34% Baa3 Baa3 Baa1 -27 bps +1 +2 0 0.16% Ba1 Ba1 Baa3 0.14% Ba1 Ba1 Baa3 0.15% Ba1 Ba1 Baa3 0.11% Ba1 Ba1 Baa3 0.11% Ba1 Baa3 Baa3 0.85% Ba2 Ba2 Baa3 -74 bps +1 +2 0 0.57% B2 Ba3 Ba3 0.53% B1 Ba3 Ba3 0.53% B1 Ba3 Ba3 0.38% B1 Ba3 Ba3 0.38% B1 Ba3 Ba3 4.08% B3 Caa2 Ba2 -370 bps +2 +5 -1 0.04% A3 A2 A2 0.04% A3 A2 A2 0.04% A3 A2 A2 0.03% A3 A2 A2 0.04% A3 A3 A2 0.40% Ba1 Baa2 A2 -36 bps +4 +2 0
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Spain (704550) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Sweden (730900) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Switzerland (731810) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Ukraine (600037040) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating United Kingdom (788250) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.01% Aa1 Aaa Aaa 0.02% Aa2 Aaa Aaa 0.02% Aa1 Aaa Aaa 0.02% Aa2 Aaa Aaa 0.02% Aa3 Aaa Aaa 0.07% A2 Aaa Aaa -5 bps +2 0 0 1.08% B3 B3 B3 1.06% B3 B3 B3 1.09% B3 B3 B3 0.86% B3 B3 B3 0.88% B3 B3 B3 3.02% B3 Caa1 B2 -214 bps 0 +1 -1 0.02% Aa2 Aaa Aaa 0.02% Aa3 Aaa Aaa 0.02% Aa2 Aaa Aaa 0.02% Aa2 Aaa Aaa 0.02% Aa3 Aaa Aaa 0.05% Aa1 Aaa Aaa -3 bps -2 0 0 0.01% Aaa Aa1 Aaa 0.01% Aaa Aa1 Aaa 0.01% Aaa Aa1 Aaa 0.01% Aaa Aa1 Aaa 0.01% Aaa Aa1 Aaa 0.05% Aa2 Aaa Aaa -4 bps +2 -1 0 0.27% Ba2 Ba2 Baa3 0.26% Ba2 Ba2 Baa3 0.27% Ba2 Ba2 Baa3 0.21% Ba2 Ba1 Baa3 0.20% Ba2 Ba1 Baa3 0.77% Ba2 Baa2 A1 -57 bps 0 -2 -5
Latin America & Caribbean

Argentina (61720) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 5.61% Caa3 -B3 5.01% Caa3 -B3 5.12% Ca -B3 4.59% Caa3 -B3 7.72% C -B3 2.95% B3 -B3 +477 bps -5 -0
10
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Barbados (849700) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Brazil (114650) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Chile (171693) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Colombia (186200) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Costa Rica (600023791) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Dominican Republic (600045733) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating El Salvador (600045734) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.52% B1 Ba2 Ba3 0.49% B1 Ba2 Ba3 0.43% B1 Ba2 Ba3 0.46% B1 Ba2 Ba3 0.47% B2 Ba2 Ba3 0.85% Ba3 Ba2 Ba2 -38 bps -2 0 -1 0.41% B1 -B1 0.42% B1 -B1 0.47% B1 -B1 0.44% B1 -B1 0.46% B1 -B1 0.91% Ba3 -B1 -45 bps -1 -0 0.16% Ba1 Ba1 Baa3 0.15% Ba1 Ba1 Baa3 0.16% Ba1 Ba1 Baa3 0.15% Ba1 Baa3 Baa3 0.15% Ba1 Ba1 Baa3 0.17% Baa2 Baa2 Baa3 -2 bps -2 -2 0 0.05% -A3 Baa3 0.05% -A3 Baa3 0.05% -A3 Baa3 0.05% -A3 Baa3 0.05% -A3 Baa3 0.15% -Baa1 Baa3 -10 bps -+1 0 0.03% A3 Aa2 Aa3 0.03% A2 Aa2 Aa3 0.03% A2 Aa2 Aa3 0.03% A2 Aa2 Aa3 0.03% A3 Aa2 Aa3 0.11% Baa1 Aa3 Aa3 -8 bps +1 +1 0 0.06% Baa1 A3 Baa2 0.06% Baa1 A2 Baa2 0.06% Baa1 A2 Baa2 0.06% Baa1 A1 Baa2 0.06% Baa2 A3 Baa2 0.16% Baa2 A3 Baa2 -10 bps 0 0 0 --B2 Baa3 --B2 Ba1 --B1 Ba1 --B2 Ba1 --B1 Ba1 0.28% -Ba3 Baa3 ---1 -1
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YEAR AGO
12 MO CHANGE
Guatemala (600011455) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Jamaica (600036085) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Mexico (489500) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Panama (591640) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Peru (601500) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Trinidad and Tobago (3055) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Uruguay (15210) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.07% Baa2 A3 Baa3 0.07% Baa2 Baa1 Baa3 0.07% Baa2 A3 Baa3 0.07% Baa2 A3 Baa3 0.07% Baa2 Baa1 Baa3 0.22% Baa3 Baa1 Ba1 -15 bps +1 0 +1 0.07% Baa2 Baa3 Baa1 0.06% Baa1 Baa3 Baa1 0.07% Baa2 Baa3 Baa1 0.07% Baa2 Baa3 Baa1 0.07% Baa2 Baa2 Baa1 0.10% A3 Baa2 Baa1 -3 bps -2 0 0 0.05% Baa1 A3 Baa2 0.05% Baa1 A3 Baa2 0.05% Baa1 A3 Baa2 0.05% Baa1 A2 Baa2 0.05% Baa1 A3 Baa2 0.19% Baa2 Baa1 Baa3 -14 bps +1 +1 +1 0.05% Baa1 Baa1 Baa2 0.05% Baa1 Baa1 Baa2 0.05% Baa1 Baa1 Baa2 0.05% Baa1 Baa1 Baa2 0.05% Baa1 Baa1 Baa2 0.14% Baa1 Baa1 Baa3 -9 bps 0 0 +1 0.05% Baa1 Baa1 Baa1 0.05% Baa1 Baa1 Baa1 0.05% Baa1 Baa1 Baa1 0.05% Baa1 Baa1 Baa1 0.05% Baa1 Baa1 Baa1 0.14% Baa2 Baa1 Baa1 -9 bps +1 0 0 1.28% B3 Caa1 B3 1.23% B3 Caa1 B3 1.24% B3 Caa1 B3 1.16% B3 Caa2 B3 1.20% B3 Caa2 B3 1.39% B2 B2 B3 -19 bps -1 -3 0 0.15% Ba1 Ba1 Ba1 0.14% Ba1 Baa3 Ba1 0.14% Ba1 Baa3 Ba1 0.12% Ba1 Baa3 Ba1 0.11% Baa3 Ba1 Ba1 0.22% Baa3 Baa3 Ba1 -11 bps 0 -1 0
12
14 JANUARY 2013
14-DECEMBER-12
21-DECEMBER-12
28-DECEMBER-12
04-JANUARY-13
11-JANUARY-13
YEAR AGO
12 MO CHANGE
Venezuela (800876) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 1.04% B3 Caa1 B2 1.18% B3 Caa1 B2 1.18% B3 Caa1 B2 0.87% B3 Caa1 B2 1.15% B3 Caa1 B2 3.31% B3 Caa3 B2 -216 bps 0 +2 0
Middle East & Africa

Angola (806356845) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Bahrain (600018600) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Egypt (258330) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Ghana (600022862) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Iraq (600018912) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.50% ---0.48% ---0.48% ---0.48% ---0.47% ---0.76% ----29 bps ---0.33% ---0.25% ---0.25% ---0.23% ---0.25% ---0.99% ----74 bps ---0.63% B2 Ba3 B2 0.62% B2 B1 B2 0.63% B2 B1 B2 0.63% B2 B1 B2 0.58% B2 Ba3 B2 1.46% B2 B1 B2 -88 bps 0 +1 0 0.13% Ba1 -Baa1 0.13% Ba1 -Baa1 0.13% Ba1 -Baa1 0.13% Ba1 -Baa1 0.13% Ba1 -Baa1 0.76% Ba2 -Baa1 -63 bps +1 -0 0.40% --Ba3 0.39% --Ba3 0.51% --Ba3 0.48% --Ba3 0.48% --Ba3 1.08% --Ba3 -60 bps --0
13
14 JANUARY 2013
14-DECEMBER-12
21-DECEMBER-12
28-DECEMBER-12
04-JANUARY-13
11-JANUARY-13
YEAR AGO
12 MO CHANGE
Israel (423305) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Jordan (600018522) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Kazakhstan (600021080) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Lebanon (600014506) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Morocco (600020405) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Nigeria (551435) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Oman (96600) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.19% --A1 0.19% Ba2 -A1 0.19% Ba2 -A1 0.19% Ba2 -A1 0.10% Baa3 -A1 0.22% --A1 -12 bps --0 0.43% --Ba3 ---Ba3 ---Ba3 ---Ba3 ---Ba3 0.65% -------0.20% Ba1 Ba1 Ba1 0.19% Ba1 Ba1 Ba1 0.18% Ba1 Baa3 Ba1 0.17% Ba1 Baa3 Ba1 0.16% Ba1 Baa3 Ba1 0.32% Ba1 Baa3 Ba1 -16 bps 0 0 0 0.50% B1 Ba1 B1 0.49% B1 Ba1 B1 0.49% B1 Ba1 B1 0.45% B2 Ba1 B1 0.43% B1 Ba2 B1 0.90% Ba3 Ba1 B1 -47 bps -1 -1 0 0.07% Baa2 -Baa2 0.07% Baa2 -Baa2 0.07% Baa2 -Baa2 0.06% Baa2 -Baa2 0.07% Baa2 -Baa2 0.40% Ba1 -Baa2 -33 bps +2 -0 0.21% -B1 Ba2 0.21% -B1 Ba2 0.21% Ba2 B1 Ba2 0.20% Ba2 B1 Ba2 0.20% Ba2 B1 Ba2 0.54% -Ba3 Ba2 -34 bps --1 0 0.08% Baa2 Baa1 A1 0.07% Baa2 Baa1 A1 0.07% Baa2 Baa1 A1 0.07% Baa2 Baa1 A1 0.07% Baa2 Baa1 A1 0.24% Baa3 A3 A1 -17 bps +1 -1 0
14
14 JANUARY 2013
14-DECEMBER-12
21-DECEMBER-12
28-DECEMBER-12
04-JANUARY-13
11-JANUARY-13
YEAR AGO
12 MO CHANGE
Pakistan (600014774) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Qatar (600048045) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Saudi Arabia (660260) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating South Africa (686830) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Tunisia (600046595) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating Turkey (768337) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating United Arab Emirates (600018601) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.30% --Aa2 ---Aa2 0.30% Ba3 -Aa2 0.28% --Aa2 0.28% --Aa2 0.12% --Aa2 +16 bps --0 0.07% Baa2 Baa2 Ba1 0.07% Baa2 Baa2 Ba1 0.07% Baa2 Baa2 Ba1 0.06% Baa2 Baa2 Ba1 0.06% Baa2 Baa2 Ba1 0.43% Ba1 Ba1 Ba2 -37 bps +2 +2 +1 0.34% Ba3 -Baa3 ---Baa3 0.33% Ba3 -Baa3 0.28% Ba3 -Baa3 0.19% Ba2 -Baa3 0.30% Baa3 -Baa3 -11 bps -2 -0 0.09% Baa2 Baa1 Baa1 0.09% Baa3 Baa1 Baa1 0.09% Baa3 Baa1 Baa1 0.08% Baa3 Baa1 Baa1 0.09% Baa3 Baa1 Baa1 0.24% Baa3 Baa2 A3 -15 bps 0 +1 -1 0.03% A3 -Aa3 0.03% A2 -Aa3 0.03% A2 -Aa3 0.03% A3 -Aa3 0.03% A3 -Aa3 0.14% Baa1 -Aa3 -11 bps +1 -0 0.04% A3 A3 Aa2 0.04% A3 A3 Aa2 0.04% A3 A3 Aa2 0.04% A3 A3 Aa2 0.03% A3 A3 Aa2 0.14% Baa1 Baa2 Aa2 -11 bps +1 +2 0 1.56% B3 Caa2 Caa1 2.08% Caa1 Caa2 Caa1 1.97% Caa1 Caa2 Caa1 1.79% Caa1 Caa2 Caa1 1.71% Caa1 Caa2 Caa1 3.43% B3 Ca B3 -172 bps -1 +2 -1
15
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North America
Canada (137160) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating United States of America (790575) CDS Implied-EDF (1-Year) CDS Implied-Rating Bond Implied-Rating Senior Rating 0.01% Aaa Aaa Aaa 0.01% Aaa Aaa Aaa 0.01% Aaa Aaa Aaa 0.01% Aaa Aaa Aaa 0.01% Aaa Aaa Aaa 0.03% Aaa Aaa Aaa -2 bps 0 0 0 0.01% Aa1 Aaa Aaa 0.01% Aa1 Aaa Aaa 0.01% Aa1 Aaa Aaa 0.01% Aa1 Aaa Aaa 0.01% Aa2 Aaa Aaa 0.04% Aaa Aaa Aaa -3 bps -2 0 0
16
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Report Number: 148897
Authors Jerry H. Tempelman, CFA Yukyung Choi Editor Dana Gordon
1.212.553.1434 Jerry.Tempelman@moodys.com 1.212.553.0906 Yukyung.Choi@moodys.com 1.212.553.0398 Dana.Gordon@moodys.com
Contact Us Americas : Europe: Asia:
1.212.553.4399 +44 (0) 20.7772.5588 813.5408.4131
Copyright 2013, Moodys Capital Markets Research, Inc., and/or its licensors and affiliates (together, "MOODY'S). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODYS PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODYS from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, such information is provided as is without warranty of any kind and MOODYS, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. 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CAPITAL MARKETS RESEARCH GROUP / MARKET SIGNALS SOVEREIGN RISK REPORT / MOODYS.COM

Mixed Market Reaction For Cyprus, Ireland: Market Signals Sovereign Risk

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14 JANUARY 2013

CAPITAL MARKETS RESEARCH

MARKET SIGNALS SOVEREIGN RISK REPORT