Our revised aggregate EBITDA forecast calls for no growth this year and flat to about 1% growth in 2020, a fraction of our forecast from earlier this year. A slowing global economy and heightened trade tensions will weigh on an industry critically dependent on trade flow. Several segments within the industry are softening; we expect only aerospace and defense to have solid growth in 2020.

The recent attacks on Saudi Aramco’s two oil facilities in eastern Saudi Arabia have resulted in a reduction of crude oil production by around 5.7 million barrels per day (mbpd) compared with an average production of 10 mbpd in the first half of 2019. The full extent of the credit impact for the government and Saudi Aramco will depend on the duration of the disruption to oil production.

Although the government’s proposals would limit the role of the federal housing finance agencies, the basic framework of the US mortgage financing system would remain intact under the proposals most likely to be implemented, which is a credit positive for private mortgage insurers.

Junior tranches of US & European CLOs risk impairment in a severe economic downturn. Junior tranche credit performance is at significant impairment risk in the severe downturn scenario, but senior CLO tranches are unscathed.