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    Moody's Analytics 2019 Articles

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    Weekly Market Outlook: VIX, EDF and National Activity Index Go Far at Explaining the High-Yield Spread

    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.

    October 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Michael Ferlez, Ryan Sweet

    2020 Presidential Election Model

    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.

    October 2019 Pdf Mark Zandi, Dan White

    Conservative Banks Do Not Need Conservative 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?

    October 2019 Pdf Dr. Tony Hughes

    Weekly Market Outlook: Worsened Fundamentals Lift Downgrades Well Above Upgrades

    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.

    October 2019 Pdf John Lonski, Ryan Sweet, Steven Cochrane, Katrina Ell, Barbara Teixeira Araujo, Andrew Pak, Steven Shields

    Weekly Market Outlook: Next Recession May Lower 10-year Treasury Yield to Range of 0.5% to 1%

    Despite today's ultra-low yields, Treasury bonds may still pay off handsomely once recession strikes.

    October 2019 Pdf John Lonski, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Michael Ferlez, Andrew Pak

    Vietnam Economic Outlook: Tiptoeing Toward the Winner's Circle

    Despite risks to the downside, the country will remain one of the world's fastest-growing economies.

    September 2019 Pdf Steven Cochrane, Steven Shields

    Usage and Exposures at Default of Corporate Credit Lines — An Empirical Study

    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.

    September 2019 WebPage

    Weekly Market Outlook: Abundant Liquidity Suppresses Defaults

    Nothing quite increases the risk of debt repayment like a drop in the income that funds the servicing of outstanding debt.

    September 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields

    Chilean Corporates Well Equipped for a Crunch

    High levels of foreign direct investment lower the risk of corporate leverage.

    September 2019 Pdf Moody's Analytics

    Weekly Market Outlook: Cheap Money in Action

    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.

    September 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields

    Model Validation Need Not Be a Blood Sport

    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.

    September 2019 Pdf Dr. Tony Hughes

    Weekly Market Outlook: Bond Implied Ratings Hint of More Fallen-Angel Downgrades

    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.

    September 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields

    Evaluating Senator Warren's Social Security Reform Plan

    This brief paper outlines Senator Warren's reform plan and evaluates its actuarial, macroeconomic and distributional impacts.

    September 2019 Pdf Mark Zandi

    Trade War Chicken: The Tariffs and the Damage Done

    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.

    September 2019 Pdf Mark Zandi, Jesse Rogers

    Weekly Market Outlook: Leading Credit-Risk Indicator Signals A Rising Default Rate

    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.

    September 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Michael Ferlez

    Weekly Market Outlook: Upon Further Review, Aggregate Financial Metrics Worsen

    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.

    August 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields

    Tip of the Iceberg: The Global Ramifications of a China Debt Crisis

    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.

    August 2019 Pdf Steven Cochrane, Jesse Rogers

    A Comparative Analysis of Household Credit Data From the New York Fed and Moody's Analytics

    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.

    August 2019 Pdf Michael Brisson, Dr. Deniz Tudor

    Weekly Market Outlook: Lowest Investment-Grade Industrial Company Bond Yields since 1956

    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%.

    August 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Michael Ferlez

    Asia Economic Outlook: Navigating Uncertainty

    The global economy is navigating troubled waters. The unresolved and significant geopolitical risks plaguing the global economy are exacerbating the slowdown in demand.

    August 2019 Pdf Steven Cochrane, Katrina Ell

    Household Credit Conditions Never Better

    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.

    August 2019 Pdf Mark Zandi

    Will CECL Ultimately Be Worth All the Fuss?

    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.

    August 2019 Pdf Dr. Tony Hughes

    Reasonable and Supportable Forecasts - From Principles to Practice

    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.

    Weekly Market Outlook: Sluggish Business Revenues Pressure Corporate Credit Quality

    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.

    August 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields

    The Ebb and Flow of Free Trade

    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.

    August 2019 Pdf Steven Cochrane, Faraz Syed

    Living in the Tail Risk: US/China 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.

    August 2019 Pdf Steven Cochrane, Katrina Ell

    Weekly Market Outlook: Successful Rate Cuts Are Short and Shallow; Failures Are Deep and Extended

    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.

    August 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Michael Ferlez

    Weekly Market Outlook: Faster Loan Growth Would Bode Poorly for Corporate Credit Quality

    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.

    July 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Ryan Sweet, Brendan Meighan, Steven Shields

    Waters Rankings 2019: Best Reporting System Provider

    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.

    July 2019 WebPage

    Weekly Market Outlook: Likelihood of a 1.88% Fed Funds Rate by End of July Soars

    The release of second quarter corporate earnings is moving into full gear and investors are not entirely happy with the results.

    July 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Steven Cochrane, Barbara Teixeira Araujo, Michael Ferlez, Ryan Sweet
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