Is liquidity masking credit quality?
Cyber risk surveys, credit impact on governments and issuers, and more.
Key global credit themes for 2021
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First-quarter 2021 corporate defaults totaled 13 globally, compared with 30 in last year’s first quarter, as government and central bank actions have played a critical role in averting an otherwise more dire default cycle. We expect the trailing 12-month speculative-grade default rate to fall to 3.2% by the end of the year, down from a likely peak of 6.8% in December 2020.
The surge in US home prices over recent months is credit positive across a wide range of US housing and housing finance sectors, helping to avert foreclosures, lift issuer revenues and margins, and bolster rental demand.
Moody’s ESG Solutions Group today announced the launch of Climate Solutions, a comprehensive product suite that provides market participants with enhanced risk measurement and evaluation tools to better understand, quantify and manage climate risks and opportunities.
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Ted Hampton of the US Public Finance team discusses how the State of Illinois is weathering COVID-19’s financial difficulties while pension obligations continue to weigh on its credit quality. Plus, Earl Heffintrayer and Myra Shankin of the Project and Infrastructure Finance team weigh in on the US airport sector’s improving prospects as passenger levels pick up.
High-frequency alternative data indicate a strong rebound in global economic activity even as COVID-19 infection rates rise and restrictive measures remain in place across many countries. Vaccinations in G-20 countries are advancing and the number of fatalities from the virus has declined in recent weeks. Financial conditions remain supportive in the US and euro area but are tightening across some emerging markets.
After a merger with a publicly traded special purpose acquisition company (SPAC), corporate issuers generally emerge with stronger credit quality, at least initially, with lower debt and improved liquidity. However, the final capital structure can result in significantly higher debt or weaker liquidity if the sponsor cannot find private investors to make up for high redemption rates.
Fresh off the Asset Management team’s virtual conference, Rory Callagy highlights how asset managers are finding growth – sometimes through acquisitions – in ESG, alternative investments and software solutions. Plus Antonello Aquino of the Banking team discusses the growing environmental risks African banks confront.
Environmental considerations will drive value chain transformation, while responsible production will force brands to embrace sustainable supply chain practises and transparency. Changing consumer behaviour heightens competition but also brings growth opportunities, while rising digital adoption comes with data protection and cyber risks.