Moody's Analytics Articles
There is no one way of statistically explaining the bond yield spreads of high-yield corporate bonds. However, one of the better approaches employs a multi-variable regression model and generates a highly significant adjusted r-square statistic of 0.89.
The economy may not be top of mind for voters in every election, but it is hardly ever further than a close second. This is the principle underpinning Moody's Analytics presidential election models.
When banks manage risk, conservatism is a virtue. We, as citizens, want banks to hold slightly more capital than strictly necessary and to make, at the margin, more provisions for potential loan losses. Moreover, we want them to be generally cautious in their underwriting. But what is the best way to arrive at these conservative calculations?
Financial markets have been buffeted by changing views regarding the trade dispute between China and the United States. Nevertheless, the direction taken by earnings-sensitive securities will ultimately be determined by the outlook for profits.
Despite today's ultra-low yields, Treasury bonds may still pay off handsomely once recession strikes.
Despite risks to the downside, the country will remain one of the world's fastest-growing economies.
Using a unique data set pooled from multiple U.S. ﬁnancial institutions, we empir¬ically study the credit line usage of middle-market corporate borrowers.
Nothing quite increases the risk of debt repayment like a drop in the income that funds the servicing of outstanding debt.
High levels of foreign direct investment lower the risk of corporate leverage.
The corporate bond market has proven to be resilient amid recent equity market volatility. Moreover, despite a slew of bearish headlines, the market value of U.S. common stock's latest low of August 14 was still a huge 20.8% above its low of December 24, 2018, while August 2019's month-long average of 19.0 points for the VIX was well under the 25.0 points of December 2018.
The traditional build-and-validate modeling approach is expensive and taxing. A more positive and productive validation experience entails competing models developed by independent teams.
On September 9, the senior unsecured bond rating of Ford Motor was lowered from Baa3 to Ba1, where the downgrade constituted a ratings reduction from investment- to speculative-grade (or high-yield). Because investor mandates often prohibit the inclusion of high-yield bonds in investment-grade portfolios, such a downgrade can quickly lower the prices of adversely affected bonds.
This brief paper outlines Senator Warren's reform plan and evaluates its actuarial, macroeconomic and distributional impacts.
Based on simulations of the Moody's Analytics model of the global economy, this paper examines the consequences for the U.S. and global economies in different scenarios regarding how the trade war between the U.S. and China will unfold.
The month-long average for the expected default frequency metric of U.S./Canadian high-yield issuers climbed from August 2018's 2.38% and July 2019's 4.16% to 4.59% in August.
The Bureau of Economic Analysis recently lowered its estimates of corporate profits for 2017 and 2018. The downward revision of nonfinancial-corporate profits mostly stemmed from a major upward revision of employee compensation costs and a slight downward revision of nonfinancial-corporate gross value added, where GVA is a proxy for revenues net of non-labor costs.
A hard landing in China remains a looming threat to the global economy and especially to the rest of Asia. This paper considers the consequences of a China debt crisis for the Chinese and global economies, with a special focus on Southeast Asia and emerging markets.
The importance of accurate and timely data on household credit conditions became clear during the global financial crisis. Quickly rising delinquencies and foreclosures should have been a warning to lenders and regulators to significantly tighten the spigot on new lending that was wide open during the pre-crisis boom. However, partially due to data limitations, many financial institutions were surprised by the weakening of household balance sheets. By the time they realized the severity of the problem, it was too late to act.
The latest rally by Treasury bonds drove Moody's long-term industrial company bond yields down to new 63-year lows. On August 14, the single-A industrial company bond yield closed at 3.30% and the Baa industrial yield ended at 4.08%.
The global economy is navigating troubled waters. The unresolved and significant geopolitical risks plaguing the global economy are exacerbating the slowdown in demand.
More than a decade after the financial crisis that was caused in significant part by debt-burdened households, there is no indication that household debt will be at the center of the next economic recession.
The industry is currently a hive of CECL-related activity. Many banks are busily testing their systems or finalizing their preparations for the go-live date, which is either in January 2020 or somewhat later, depending on the organization. Some are still making plans for implementation, and the rest are worried that they should be.
With many of the larger SEC filers well ahead in their CECL preparations and gearing up for validation, we examine how the requirements of an R&S forecast and reversion may be interpreted.
It was a tumultuous week. Volatility will lurk until trade issues are resolved. Perhaps the best markets can hope for on the trade front is a long-lived truce.
We demonstrate how the pattern of trade and the rules that have governed trade have changed dramatically over the past two years from a system that was set up shortly after World War II and that more or less thrived until the current trade war.
The US-China trade war has gone down a darker path. The trade war has escalated beyond expectations and the stakes are high for the global economy.
Since 1984, there have been seven distinct series of Fed rate cuts. Four of the seven rate cut episodes occurred amid a mature business cycle upturn and managed to stave off a recession. They happened in 1985, 1987, 1995, and 1998.
Forecasts of a prolonged depreciation of the dollar exchange rate may be overlooking to the increased importance of U.S. spending as a driver of global economic growth.
Regulatory reporting has emerged in recent years as a critical business function that needs to be managed accurately, efficiently and transparently, even though it is an area where capital markets firms tend not to be able to leverage as a competitive differentiator.
The release of second quarter corporate earnings is moving into full gear and investors are not entirely happy with the results.