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Monitoring the effects of the pandemic
The six key themes shaping credit markets in 2020
Moody's response to the coronavirus crisis
The US has lost more than 40 million jobs since March, but the pace of losses has slowed. The labor market recovery will vary dramatically, with some sectors quickly absorbing furloughed employees as stay-at-home orders and other restrictions ease, while others shed jobs permanently.
The coronavirus outbreak is disrupting economies and credit markets worldwide. The impact on issuers’ credit profiles and the economy will depend on the severity and duration of the crisis.
Lucie Villa of the Sovereign team discusses a debt relief initiative for low-income countries grappling with liquidity pressures. Also, Daniela Jayesuria of the Structured Finance team offers insights on coronavirus-related debt moratoriums for individual and corporate borrowers in Latin America, one of the biggest securitization markets in emerging markets.
China's government released its policy focus for 2020, which includes a moderate degree of fiscal support for the economy, accommodative monetary policies and measures to support employment. The policies will have varying credit effects on different sectors of the economy.
The regulatory capital ratios of all five US-based global investment banks fell in the first quarter because of higher provisions for credit losses and rising risk-weighted assets amid the coronavirus pandemic. Stock buybacks and dividend payments amplified the credit-negative pressure on the banks’ capital ratios.
High frequency and alternative data indicators in May indicate the economic shock from the coronavirus pandemic will be concentrated in the second quarter, in line with our expectations. We forecast a slow recovery in the second half of the year for most economies.
David Keisman and Julia Chursin discuss why US corporate defaults during the pandemic are likely to produce bigger losses for investors. Erosion in credit quality, structure and covenants will suggest worse debt recoveries for first-lien bank debt in particular. Meanwhile, the prevalence of distressed debt exchanges will not be sufficient to stave off subsequent defaults if the downturn’s duration is protracted.
Moody’s Analytics performs stress tests on state government budgets - estimating the amount of fiscal stress likely to be applied to state budgets under different recession scenarios and comparing that to what states have in reserve. The overall results of the COVID-19 exercise are unmistakably negative during this unprecedented time.
US labor market begins to stabilize, but job losses in hard-hit sectors will be prolonged
Dutch bank's plan for mortgages coming off coronavirusrelated payment holidays is negative for RMBS cash flows
Mortgage insurers brace for higher delinquencies as unemployment rate spikes