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Key themes shaping global credit markets in 2019
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Moody’s Financial Conditions Indicator, a composite of 18 measures of US financial and economic activity, was marginally negative in August and September, suggesting that trade policy uncertainty and slower growth may be having an impact on market sentiment and financial activity.
EU banks and asset managers have long lagged their US counterparts in terms of profitability, and the region’s fragmented markets have played a major role in holding firms back in their search for scale. Lower interest rates, slower growth and smaller capital markets in Europe are also key factors behind the profitability gap.
David Burger and Shan Lai of the Structured Finance group discuss the differences between SME and BSL CLOs and how SME CLO structural features compensate for weaker SME loan collateral.
The global investment banks are at high risk of cyberattacks through their multiple, complex businesses but display advanced cyber readiness, often with best-in-class practices. They have adopted international standards, effectively share information with other large financial institutions and benefit from enhanced regulation.
The stable outlook balances our views that Chinese banks’ operating environment and profitability will weaken in the next 12-18 months but that their asset quality, capital and liquidity will remain supported.
More robust underwriting, higher credit enhancement and the effects of macroprudential policies are all credit positive for post-crisis transactions relative to deals that closed before 2009. However, there have been some recent exceptions, especially in the UK, the most active RMBS market in EMEA.
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Adjusted net pension liabilities (ANPL) declined in states' fiscal year 2018 reporting due to healthy investment returns in fiscal 2017, though unfunded pension liabilities remain high for some states.
Brendan Sheehan from the Governance group and Lesley Ritter of the Cyber Risk team discuss the varying levels of transparency in cyber corporate disclosures across high risk sectors