Market Signals Review

Despite the modest rise in oil prices, the CDS- and bond-implied ratings for Exxon both worsened over the last 90 days.

Author: Allerton Smith 
Date: May 20, 2015
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The CDS- and EDF™- implied ratings for Toyota both improved over the last year.

Author: Allerton Smith 
Date: May 13, 2015
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The market-implied ratings for Pfizer were very strong with low volatility over the last 90 days.

Author: Allerton Smith 
Date: May 5, 2015
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Over the last three months the bond-implied rating for Texas Instruments moved up three notches from A1 to Aa1. The CDS-implied rating of A2 and the EDF™-implied rating of Aaa did not change.

Author: Allerton Smith 
Date: May 4, 2015
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The fixed-income-oriented market-implied ratings for Kraft Foods Group Inc. and H.J. Heinz Company strengthened following the announcement of their planned combination on March 25. Kraft’s bond-implied rating is better by one notch, to Baa1, while Heinz’s rose a notch to Baa3.

 

Author: Allerton Smith
Date: April 9, 2015

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Two of Capital One’s market-implied ratings showed improvements over the last three months. The bond-implied rating was Baa2 three months ago and made several fluctuations between that level and Baa1, where it is now. The EDF™-implied rating moved up by one notch to Ba1 from its recent Ba2 low point on January 30. The CDS-implied rating has been unchanged at A3 over the last 90 days, although it previously recovered from shortlived dips to Baa1 in September and October 2014.

 

Author: Allerton Smith
Date: April 08, 2015

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This article discusses the weaking of two fixed-income-oriented market-implied ratings for E.l. DuPont de Nemours and Company over the past 90 days, consequently reaching its worst levels observed over the last five years.

Author: Allerton Smith 

Date: April 2, 2015
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In this presentation, David Munves, Divisional Managing Director of the Capital Markets Research Group, discusses how cash and synthetic corporate portfolio managers can use Fair Value Spreads, as derived from public firm EDFs, in their investment and portfolio monitoring processes.

Author: David Munves
Date: April 1, 2013
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The bond-implied rating for BorgWarner, Inc. has reached A2, which is its highest level over the last five years. The bond-implied rating was B1 in May 2010 and it has climbed eight notches since then, three notches over the last 12 months.

Author: Allerton Smith
Date: March 31, 2015

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This article discusses how HSBC holding's credit market metrics have underperformed those of its peers prior to information about alleged client tax avoidance and potential money laundering appeared in an early February publication.

Author: Lisa Hintz 
Date: March 19, 2015

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The three market-implied ratings for CNA have moved on their own paths over the last three months. The bond-implied rating for CNA worsened from Baa2 90 days ago to Baa3 at present.

 

Author: Allerton G. Smith
Date: March 16, 2015

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The current bond- and EDF™-implied ratings for Airbus are both above their weakest points of the last year.

 

The bond-implied rating for Airbus Group Finance B.V. was Aa3 one year ago. Over the summer it declined to A1 on multiple dates. It then climbed three notches to Aa1 for just one day on December 24, 2014. Since then it varied between Aa2 and Aa3. It moved to Aa2 in late early March, where it is now. (Airbus Group Finance B.V. is the finance subsidiary of Airbus Group N.V.)

 

Author: Allerton Smith
Date: March 11, 2015

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Each of CIT’s market implied ratings has fallen from its apex of the last 90 days. CIT’s bond-implied rating is Ba2 now. It climbed to Ba1 on multiple days over the last three months, but was unable to sustain the advance.

 

Author: Allerton Smith
Date: March 10, 2015

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The market signals for AT&T followed different paths recently. The fixed-income marketimplied ratings fell while the EDF™-implied rating, which incorporates stock price as one of its elements, improved.

 

Author: Allerton Smith
Date: March 09, 2015

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This article discusses the current EDF-and bond implied ratings for HCA which are higher than a year ago.

 

Author: Allerton Smith  
Date: March 2, 2015

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This article discusses Hartford Financial Services Group's two fixed-income market signals that have dipped from their highest levels over the last three months.

 

Author: Allerton Smith  
Date: February 24, 2015

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The current CDS- and EDF™-implied ratings for Cigna are both better than their levels of 90 days ago. The EDF™-implied rating was A1 on November 19, 2014 and is now Aa1.

 

Author: Allerton Smith
Date: February 23, 2015

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This article discusses the rebounding of the CDS-implied rating for General Mills, which briefly slumped to Baa1 during the last 90 days.

Author: Allerton Smith
Date: April 13, 2015

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Chubb’s three market-implied ratings all improved over the last year. The CDS-implied rating is presently Aaa, two notches above its level of one year ago.

Author: Allerton Smith 
Date: February 9, 2015

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Despite depressing headlines about stagnation in Europe’s economy, and France’s in particular, BNP’s bond-implied rating moved up into the Aa range over the last three months.

 

Author: Lisa Hintz 
Date: January 28, 2015

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All three market-implied ratings for Bombardier weakened over the past 90 days, to the worst levels observed over the last five years.

Author: Allerton Smith
Date: January 28, 2015

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This presentation from the Market Signals Roadshow Events in Copenhagen and Amsterdam in October 2012 discusses how to use market signals in your risk management processes, including the following important topics:

-Market Implied Ratings (MIR) and Public Firm Expected Default Frequency (EDF) Metrics
-Credit Market Signals: A Deep Dive
-Credit spreads, default rates, and ratings
-Equity prices as signals of credit risk
-Spreads and ratings for confidence-sensitive entities
-Credit model outputs vs. levels of credit exposure
-Effective Monitoring and Early Warning with EDF Measures

Author: David Munves and David Hamilton
Date: October 10, 2012

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Download this presentation to understand how to generate portfolio outperformance using market-based signals inclusive of an analysis of alpha factors at the portfolio and bond level. This presentation was given at the London market-signals road show in October 2012.

Author: David Munves 
Date: October 9, 2012

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1. Model Portfolio Construction and Performance Measurement
2. Alpha Factor Model Portfolio Performance
3. Drill-down Analysis: Performance by Sector and Quality Bucket

Author: David Munves
Date: May 15, 2012

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Stressed EDF Credit Measures
Default Probabilities Under Stressed Macroeconomic Scenarios

Author: David Hamilton
Date: May 15, 2012

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Agenda:
1. Market Implied Ratings (MIR) and Expected Default Frequency (EDF) Metrics Explained
2. Credit Market Signals: A Deep Dive
»Credit Spreads, Credit Default Rates, and Ratings
»Equity Prices as Signals of Credit Risk
»Spreads and Ratings for Confidence-sensitive Entities
»Credit Model Outputs vs. Levels of Credit Exposure
3. Effective Monitoring and Early Warning with EDF Measures

Author: David Munves and David Hamilton
Date: May 14, 2012

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Canada’s banks are more highly rated by Moody’s and have higher market-implied ratings than any other banking region globally. The combination of strong underlying credit fundamentals, a prudent regulatory environment, sound government fiscal management policies, and a more stable real estate market have all contributed to the superior standing of Canada’s banks. Investors seeking a safe haven from continuing fiscal budget troubles in Europe and continuing credit uncertainties in other regions may well find the Canadian banks to be an attractive option.

Author: Allerton (Tony Smith) and Ervis Deda
Date: April 10, 2012

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After a positive spell following the launch of the ECB’s Long-term Refinancing Operations Spanish bank credit spreads have been widening and their implied ratings have been falling again, as investors have refocused on the considerable, and unresolved, challenges facing the country and its banks. Additional signs of strain are evident among sub-sovereign entities, with market signals on Spanish regions weakening as well. All this also had an impact on the market’s view of the Kingdom of Spain’s creditworthiness, as the potential liability on the sovereign (for supporting the banks and the regions) has grown.

Author: Lisa Hintz and Ervis Deda
Date: April 9, 2012

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Market-based probabilities of default of many sovereign debt issuers deteriorated slightly by the end of this past week following a weaker than expected survey of European purchasing managers. CDS-implied EDF (Expected Default Frequency) credit measures of Spain worsened noticeably. Most of the increase occurred on Wednesday, after economists of financial institutions in the U.S. and Europe publicly identified Spain as a continuing source for financial risk, and Moody’s Investors Service noted that the country’s fiscal situation remains challenging.

Author: Jerry H. Tempelman, CFA
Date: March 26, 2012

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The Federal Reserve required 19 bank holding companies (BHCs) to estimate their capital positions under a variety of stressed assumptions over a nine-quarter period ending in Q4 2013. Following the Fed’s March 13 announcement of stress test results, the EDF measures and EDF-implied ratings improved more than fixed income market signals. Some CDS spreads, individual CDS-implied ratings, and bond-implied ratings also improved after the release of the stress test results. But overall equity market signals produced a greater degree of outperformance.

Author: Allerton (Tony) Smith and Ervis Deda
Date: March 26, 2012

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