20161006-穆迪服务-Liquidity_Buoys_Credit_29页_1mb

Moody's Weekly Market Outlook Summary

Core Content

Moody's Weekly Market Outlook provides a detailed analysis of credit markets, focusing on trends in credit spreads, defaults, and issuance. It also covers key economic indicators and their implications on market performance, along with insights on M&A activity, equity infusions, and the role of inflation expectations. The report further discusses the outlook for the U.S., Europe, and Asia-Pacific, with a special emphasis on the impact of global events such as Brexit and the U.S. Federal Reserve's monetary policy.

Main Points

• Credit Spreads:

  • Investment Grade: Expected to remain close to 142 bp by year-end 2016.
  • High Yield: Projected to narrow from 497 bp to around 575 bp by year-end 2016.

• Defaults:

  • US HY default rate is expected to fall from 5.7% in August 2016 to near 4.5% by summer 2017.
  • The number of high-yield downgrades due to worsened fundamentals dropped by 11% and 15% in Q2 and Q3 2016 respectively.
  • High-yield upgrades linked to improved fundamentals increased by 14% and 11% in Q2 and Q3 2016 respectively.

• Issuance:

  • US$-denominated IG bond issuance is projected to increase by 8.2% to a record $1.436 trillion in 2016.
  • US$-priced high-yield bond issuance is expected to decline by -8.1% to $325 billion in 2016.

• M&A Activity:

  • M&A activity contributed to 24 upgrades and 14 downgrades in the third quarter of 2016.
  • The number of M&A-linked upgrades was the highest since Q2-2015, while downgrades were the fewest since Q1-2016.

• Equity Infusions:

  • The third quarter's strong U.S. equity market led to 13 high-yield upgrades due to equity infusions.
  • These infusions were primarily from private-equity owners and IPOs.
  • Shareholder compensation-related downgrades dropped to five in Q3-2016, the lowest since Q1-2015.

• Industrial Commodities:

  • Industrial commodity prices have rebounded, contributing to fewer downgrades and more upgrades.
  • WTI crude oil prices rebounded by 34.6% from their Q1-2016 low.
  • The Moody's Industrial Metals Index rebounded by 10.6% in Q3-2016.

• Leverage Trends:

  • Corporate leverage remains a challenge, with nonfinancial corporate debt growing at 6.5% annually.
  • Despite potential profit rebounds, the weak economic and inflation outlook limits the upside for corporate debt.

• European Banks:

  • European banks, particularly Deutsche Bank, have been a source of global market uncertainty.
  • Bank equity prices in the Eurozone Stoxx index have fallen by 48% from last year's high.
  • Euro-denominated bank bonds show modest yields, suggesting strong balance sheets, but the sector faces risks due to regulatory and capital requirements.

• Inflation Expectations:

  • Inflation expectations have risen slightly but remain historically low.
  • The five-year breakeven inflation rate increased to 1.45% from 1.24% in early September.
  • The five-year five-year forward inflation expectations rate is at 1.79%, suggesting a more aggressive Fed policy.

Key Information

• Market Performance:

  • The U.S. high-yield corporate bond market saw a significant rebound, with an annualized return of 20.6% year-to-date.
  • The 30-year Treasury yield fell from 3.01% to 2.44%, indicating a strong performance for long-term debt.

• Economic Outlook:

  • The U.S. is expected to see a recovery in operating profits from a -2.1% decline in 2016 to a 2.7% increase in 2017.
  • If profits continue to shrink, the default outlook will worsen, and spreads will rise.

• Upcoming Reports:

  • U.S. Employment Report (October 7): Expected to show a 174,000 increase in nonfarm payrolls and a 4.9% unemployment rate.
  • FOMC Meeting Minutes (October 12): Will indicate the Fed's stance on rate hikes.
  • Import Price Index (October 13): Forecast to rise modestly after a decline in August.
  • Retail Sales (October 14): Projected to rebound after a drop in August.
  • Producer Price Index (October 14): Expected to show some uplift in fuel costs.
  • Business Inventories (October 14): Likely to rise slightly after a contraction in July.
  • University of Michigan Consumer Sentiment (October 14): Forecast to reach 92.1, indicating a rise in expectations.

• Europe:

  • Inflation indicators for major euro zone economies are expected to show improvement in the coming week.
  • France's industrial production is projected to increase by 0.6% m/m in August, but remain flat on a year-ago basis.
  • Germany's industrial production is expected to remain stable, with a slight drop in manufacturing orders.
  • U.K. house prices are forecast to increase by 6.1% y/y in the three months to September, down from 6.9% in the previous month.

• Asia-Pacific:

  • The report includes a preview of economic reports and forecasts from the Asia-Pacific region, though specific details are not included in the provided content.

Conclusion

Moody's Weekly Market Outlook highlights the positive trends in credit markets, driven by accommodative monetary policies and improved fundamentals. However, it also warns of potential risks, including the impact of global events, the challenges of rising leverage, and the potential for inflationary pressures. The report underscores the importance of monitoring economic indicators and market sentiment as key factors in shaping future credit market dynamics.