20150604-穆迪服务-Fundamentals,_not_Bunds,_Ultimately_to_Guide_T-Bonds_25页_489kb

Moody's Weekly Market Outlook Summary

Core Content

Moody's Weekly Market Outlook focuses on the interplay between economic fundamentals and bond market dynamics, particularly highlighting the relationship between Treasury yields and credit quality. The report emphasizes that while bond yields may be influenced by factors like government bond yields and central bank policies, the long-term direction of T-bonds will ultimately be driven by underlying economic conditions.

Main Views

• Treasury Yields and Fundamentals: The 10-year Treasury yield is currently above its predicted value based on a model that includes federal funds rate, core PCE inflation, high-yield bond spreads, and demographic data. The model suggests that the yield should be around 2%, but it has risen to 2.32%, indicating a potential slowdown in US business activity if the yield were to rise further.
• High-Yield Bond Spreads: The high-yield bond spread is expected to increase to 460 bp by year-end 2015, reflecting a rise in expected default frequencies (EDF) for US high-yield companies. A continued rise in EDF could lead to wider spreads, reducing business credit flows and affecting stock prices.
• Credit Market Trends: The number of high-yield downgrades linked to M&A activities is expected to be lower than 2013 and 2007 levels, while upgrades from equity infusions will also decline. This suggests a cooling in special-event-driven credit changes.
• Economic Forecasts: The report forecasts a slowdown in global economic growth, with the US real GDP growth expected to decline from 3.1% to 2.2% in 2015. The European Central Bank's bond-buying program and the weaker euro are contributing to improved economic conditions in the eurozone.
• Regional Outlook:
  • United States: The employment report for May is expected to show 220,000 nonfarm payrolls and a 5.4% unemployment rate. However, weak wage growth and slack in the labor market suggest continued economic softness.
  • Europe: The eurozone's industrial production is expected to grow slightly, driven by a weaker euro and low oil prices. Spain and France are showing signs of recovery, but Greece's political uncertainty poses a risk to the region.
  • Asia-Pacific: China's economy is expected to continue slowing, with weak domestic demand and a housing slump affecting investment and trade. Taiwan and Malaysia are also expected to maintain stable trade balances, though exports are under pressure from weak demand and low oil prices.

Key Information

• Credit Spreads:
  • Investment Grade: Year-end 2015 spread is expected to resemble its recent 145 bp.
  • High Yield: Spread is projected to reach 460 bp by year-end 2015.
• Defaults:
  • US HY default rate: April 2015 at 1.7%, with an average of 2.9% in Q1 2016.
• Bond Issuance:
  • US$ IG bond issuance for 2015 is projected to grow by 16% to $1.305 trillion.
  • US$ HY bond issuance is expected to decline by 1% to $415 billion.
• Moody's Publications: The report references recent commentaries on various sectors and companies, including JNJ, GECC, VZ, Greece, Brazil, and more, as well as analyses on credit quality and market trends.

Market Data Highlights

• Credit Spreads: The high-yield bond spread is expected to rise to 460 bp, which is above its current range of 440–450 bp.
• Special Event Rating Changes: M&A-linked downgrades are expected to be lower than 2013 and 2007 levels, with upgrades also declining.
• Consumer Confidence: The University of Michigan Consumer Confidence Index is forecast to rise slightly in June, but gas prices may limit gains.
• Industrial Production: The eurozone's industrial production is expected to grow by 0.2% m/m, with France and Italy showing modest increases.

Conclusion

The report underscores that while current bond yields may be influenced by short-term factors like government bond yields and central bank actions, the long-term trajectory of Treasury yields will be determined by the fundamental health of the economy. The outlook remains cautious, with risks of further yield increases if economic growth does not improve, and potential challenges for the high-yield market due to rising credit risk.