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WEEKLYMARKET OUTLOOK

MARCH 8, 2012CAPITAL MARKETS RESEA

Moodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc is a subsidiary of Moodys Corporation. MooAnalytics does not provide investment advisory services or products. For further detail, please see the last page.

Looking for Inflation in All the WrongPlaces

Credit Markets Review and Outlook by John LonskiLooking for inflation in all the wrong places.

FULL STORY PAGE 2Topic of the Week by Jerry H. Tempelman

European debt crisis update: Swimming this way and that. FULL STORY PAGE 8The Week AheadWe preview 10 reports from the US, 27 from the UK/Europe, and 23 from the Asia/Pacific.

FULL STORY PAGE 1The Long ViewCheck our chart here for forecastsummaries of key credit market metrics.Full updated stories (If the outlookimproves, the funding of acquisitions andshareholder compensation will lend moresupport to corporate borrowings nowample pace) begin on page 19.

FULL STORY PAGE 22Ratings Round-UpUS positives surge; Europe calm.

FULL STORY PAGE 24Market DataCredit spreads, CDS movers, issuance.

FULL STORY PAGE 26Moodys Capital Markets Research recent publications

Links to commentaries on: Europe, Regions, WYG, LinkedIn, PNC, banks, sovereigns, issuance,crude awakening, Aetna, HY surge, bank credit spreads, Clearwire, and consumer staples

FULL STORY PAGE 30

CreditSpreads

Investment Grade: Year-end 2012 spread tonarrow by at least 5 bp from its recent 128 bp.High Yield:

Defaults

Recent spread of 615 bpcould fall by110 bp in response to a forthcoming stabilizationof global financial markets.US HY default rate: Up slightly, to 2.5% in

June 2012Issuance IG: up by 12% in 2012 to $954 billion

HY: up by 15% in 2012 to $301 billion

Click here for Weekly Credit Outlook, our sister publication containing Moodys rating agency analysis orecent news events, summaries of recent rating changes, and summaries of recent research.

MoodysCapitalMarketsResearch,Inc.

Weekly Market Outlook Contributors:David W. Munves, [email protected]

John Lonski

[email protected]

Jerry H. T empelman, [email protected] Garber

[email protected] Sanneh

[email protected] Choi

[email protected] Makarova

[email protected] Kim

[email protected] Deda

[email protected]

Moody's Analytics/Europe:Enam [email protected]

Moody's Analytics/Asia-Pacific:Fred [email protected]

EditorDana [email protected]
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2 MARCH 8, 2012 CAPITAL MARKETS RESEARCH GROUP / WEEKLY MARKET OUTLOOK / MOODYS.COM

CAPITAL MARKETS RESEARCH

Credit MarketsReview and Outlook

Credit Markets Review and OutlookBy John Lonski, Chief Economist, Moodys Capital Markets Research Groupand Ben Garber, Economist, Moodys Capital Markets Research Group

Looking for Inflation in All the Wrong Places

In his recent semi-annual testimony to Congress, Fed chairman Ben Bernanke reiterated that a 2% annualrate of PCE (personal consumption expenditure) price index inflation is consistent over the long run with theFederal Reserves mandate to promote stable prices. The fact that the 2% target is a long-run average rate oinflation implies that the Fed can tolerate temporary deviations from 2% provided that it believes theinflation rate will eventually return to its long-term trend.

This may be all well and good. However, a visiting economist from another planet might be struck by howthe last two recessions, including the most severe recession since the Great Depression, were byproducts ofinflationary bubbles that had absolutely nothing to do with the PCE price index. Too many investors havelearned the hard way that one can make a colossal error by focusing too hard on what has been therelatively mild pace of PCE price index inflation. Indeed, there have been times where rampant asset priceinflation has been of much greater importance than the moderate rate of consumer price inflation. Perhapswhat is needed is a mega-price index that includes the prices of both assets and consumer products.

Runaway stock price inflation sparked 2001s recessionThe recession of 2001 was largely the offshoot of an unsustainable surge by stock prices. Financial marketswere setting themselves up for a calamitous fall when the 23% average annualized surge by the marketvalue of common stock of the five-years-ended March 2000 surged past profits accompanying averageannual increase of 4%. (Figure 1.)

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Figure 1: Gross Overvaluation of Equities Relative to Profits Helped to Trigger the Recessionof 2001

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Figure 2: Often Disruptive Instability of Equity Prices Differs Radically from the GreatModeration of the PCE Price Index: yy % change of moving 12-month averages

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Moreover, during the five-years-ended Q1-2000, PCE price index inflation averaged a very tolerable 1.8%annually. Cueing policy to the PCE price index risked missing the inflation of an equity price bubble, whoseultimate bursting sank the entire economy. (Figure 2.)

Breakneck home price inflation led to an unfinished calamityHowever, the damage done to the global economy by the stock price inflation of 1995-2000 was nothingcompared to the devastation stemming from the US real estate price bubble of 2002-2006. Much different

from the PCE price indexs accompanying 2.3% average annual rise, Case-Shillers home price index of 20metropolitan regions surged higher by 12% annualized, on average, during the five-years-ended June 2006.(Figure 3.)

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Case Shiller Home Price Index of 20 Metropolitan Regions PCE Price Index

Figure 3: Despite the Great Moderation of the PCE Price Index, the US Suffered DestructiveBouts of Home Price Inflation and Deflation: indices, Jan-00 = 100

Rapid home price inflation catapulted the ratio of home price to income up to untenable heights, where thecorrection of such speculative excess now enters its sixth year. (Figure 4.)

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Median Price of Existing Homes Sold as % Employment Income per Worker

Figure 4: Unprecedented Surge by Home Prices Relative to Income Triggered the Great

Recession of 2008-2009

If the recession of 2008-2009 was far more severe and lasting in terms of its pernicious effect on the US

economy, then the runaway home price inflation of 2002-2006 was far more damaging than the legendaryPCE price index inflation of the 1970s and early 1980s. During that span of persistently rapid consumer pricegrowth, the five-year average annualized rate of PCE price index inflation peaked at the 8.5% of Q3-1981,which was well above its latest 2.1% average. Since 1995, the five-year average annualized rate of PCE priceindex inflation has risen no higher than the 3.1% of Q3-2008, where that upturn was mostly the byproductof a surge in oil prices to record highs. Had the Fed tightened monetary policy in response to Q3-2009s4.2% annual rate of PCE price index inflation, a horrid recession would have been even worse. So much forputting Fed policy on automatic pilot that takes its guidance solely from consumer price inflation. If onlybecause central banks have no way of quickly influencing oil prices, it may not be particularly wise tounflinchingly gear monetary policy to consumer price indices that are very sensitive to energy pricefluctuations. (Figure 5.)

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Figure 5: PCE Price Index Inflation Has Not Been Among the Major Drivers of EconomicDistress for Some Time

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Total Sales of 1 Family Homes: mills of units, annlzd ( R )

Figure 6: Deflation Fears Severely Weaken Suppor t from Record Home AffordabilityNote 2005's "Bubbly " Climb by Home Sales amid Plunging Affordability: mov 3-mo avgs

The fact that a deep plunge by home affordability was unable to curb the earlier spending spree on housingunderscored the speculative nature of the erstwhile boom in home sales. (Figure 6.) Both homebuyers andmortgage creditors brushed aside the warnings of diminished affordability on the grounds that theinevitability of ever increasing home prices would correct any errors in lending. All too often, both mortgageborrower and lender assumed that even if mortgage servicing became unmanageable, foreclosures would beaverted by disposing of affected properties at an attractive price. Early on that assumption proved true.Despite a plunge by affordability that included a jump by the ratio of home prices to income per worker to arecord high, the home mortgage delinquency rate sank from Q3-2001s 5.3% to Q1-2005s 4.3%. Thelatter brought attention to how higher-than-expected prices or wages can facilitate unanticipated declinesby loan delinquency rates. Its when prices and incomes lag expectations that debt repayment problemsmount.

Japan shows that quantitative easing need not lead to ruinous inflationMany now fret over the inflation threat implicit to the rapid growth of the Federal Reserves balance sheet.After averaging a very steady 6.1% of GDP during the 30-years-ended Q2-2008, Fed assets have sinceclimbed up to the 19.2% of Q4-2011. But that fell short of Q4-1947s record high 19.7%. Despite how Fedassets approximated a comparatively steep 17.6% of GDP during the five-years-ended 1951, the USeconomy remained safely distanced from a calamitous upturn by inflation. PCE price index inflation hasremained well contained notwithstanding the very rapid growth of Fed assets. In fact, the 1.7% averageannual rate of PCE price index inflation during the first 3.5 years of the now elevated ratio of Fed assets toGDP is less than its 2.9% average annual rate of the 3.5 years immediately prior to the Q3-2008 start to theFeds stepped of purchases of assets. (Figure 7.) In addition, the TIPS contract shows that quantitative easinghas yet to lift the expected rate of CPI inflation up to its 2.5% average of 2003-2006. (Figure 8.)

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Figure 7: PCE Price Index Inflation Remains Well Contained Despite Surge by Federal ReserveAssets Relative to GDP

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Figure 8: Fed's Buying of Assets Has Done More to Stabilize Inflation Expectations Than toDrive Such Expectations to New Highs

Too often we forget that the Fed was not the first central bank to resort to quantitative easing duringmodern times. During the latter part of the 1990s, the Bank of Japan turned to quantitative easing for thepurpose of ending price deflation. Nevertheless, Japanese price deflation has remained in effect since 1997notwithstanding a jump by Bank of Japan assets from 1994s 10% to nearly 30% of that countrys GDP.(Figure 9.)

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Figure 9: Relative to GDP, Fed's Asset Buying Sp ree Has Yet to Rival That of the Bankof Japan Assets

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If the US now suffers from impediments to growth that are in many ways scaled-down versions of what ailsJapan, then the Feds ongoing efforts to shore up a vulnerable economic recovery may not be setting thestage for a destructive episode of intractable price inflation. (Figure 10.)

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Figure 10: Despite a Surge by Bank of Japan Assets vis-a-vis GDP, Japan's Version of the PCEPrice Index Has Deflated Since 1997

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Topic of the WeekBy Jerry H. Tempelman, CFA

European Debt Crisis Update: Swimming This Way and That

Financial markets can at times seem like a Jacques Cousteau movie. One moment a school of blue fish maybe swimming from left to right, when all of a sudden they start going from right to left instead and are nowyellow. There have been several such changes in sentiment in financial markets recently, triggered in part bydevelopments in the sovereign credit sphere but affecting markets in many risky assets.

After a gradual improvement following the latest Greek rescue agreement on February 21, markets inequities, high yield and investment grade corporate bonds, as well as in sovereign debt, corrected this pastTuesday, with the VIX Index of S&P 500 put and call option volatility trading above 20 for the first time inmore than two weeks. Sentiment changed again two days later, on better than expected German industrialoutput and Japanese economic growth.

Figure 1. One-year CDS-implied EDF TM metric of selected sovereign issuers

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Market-based probabilities of default of sovereign debt issued by the so-called GIIPs nations remain elevatedrelative to their recent lows (Figure 1). CDS-implied EDFTM (Expected Default Frequency) credit measuresof Portugal, in particular, have increased significantly in recent days: its one-year metric jumped from 3.62%on Feb. 24 to 4.72% on March 7; its cumulative 5-year metric rose from 17.6% to 21.1% over the sameperiod.

While the recent liquidity injections by the European Central Bank have had a positive effect on yields ofItalian and Spanish government debt, this has not been the case for Portugal (Figures 2, 3, 4). Marketparticipants apparently believe that while Italy and Spain may be having liquidity issues, Portugal may

potentially have solvency issues, and at some point be in need of a second round of financial assistance.Portugal has been able to issue short-term debt, but nothing with a maturity of more than one year. Underthe terms of its existing rescue agreement, the country is supposed to access the capital markets again in2013. Portugals current bond yields suggest that this objective is somewhat of a reach. Market participantsare also increasingly worried that if and when a second rescue plan for Portugal is arranged, it will be similarin structure to the recent Greek rescue agreement. That is, financial losses will be imposed on private-sectocreditors as a condition for additional financial aid, in spite of what policymakers may have wished aboutGreece being a unique situation.

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8 MARCH 8, 2012 MOODYS CAPITAL MARKETS RESEARCH, INC. WEEKLY MARKET OUTLOOK MOODYS.C



Figure 2. Generic government bond yields of Italy

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Figure 3. Generic government bond yields of Spain

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Update on the Greek dramaGreece appeared to be making progress this past week on its debt-exchange. On Monday, 12 members ofthe Institution of International Finance announced they would participate in the exchange; on Wednesdaythat numbers was expanded to 32 institutions, which in aggregate own 84 billion of Greek debt, or 40.8%of Greeces 206 billion of debt owned by private institutions. On Thursday, a Greek government official

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stated that more than 75% of all Greek debt held in private hands had been tendered into the exchange.The country also indicated it would not have any money available to repay debt issued under English law a move designed to get holders of those particular debt tranches to participate in the exchange even thoughthey could not be forced to do so with collective-action clauses retroactively attached to bonds issued undeGreek law.

The International Swaps and Derivatives Association did not update its March 7 determination that nocredit event had occurred with respect to the Greek debt restructuring; such a credit event would trigger

payment on CDS contracts written on Greek government debt. ISDAs determination came in response totwo very specific questions. The first was whether Greek government debt held by private investors hadbecome economically subordinate to bonds previously held by the European Central Bank and nationalcentral banks that had been exchanged for new debt not subject to the restructuring. The second questionwas whether there had been an agreement between Greece and holders of private Greek debt thatconstitutes a credit event. Thus, ISDAs determination did not answer, for example, whether the impositionof collective-action clauses, in combination with the Greek debt restructuring itself, constitutes a creditevent. Indeed, ISDA pointed out that its decision does not exclude the possibility that a determination of acredit event may yet be made in response to additional questions. Many observers believe that theinvocation by Greece of a collective-action clause will be deemed a credit event by ISDA.

Moodys Investors Service recently downgraded Greeces local- and foreign-currency bond ratings from Cato C, the lowest notch on the Moodys rating scale. Moodys stated that the distressed-debt exchangeconstitutes a default because (i.) the exchange imposes losses on existing investors, and (ii.) an outright

default would have been likely in the absence of the debt exchange.

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The Week Ahead



The Week Ahead

THE US

By John Lonski and Ben Garber

Moodys Capital Markets Research Group

Estimates are consensus views. Release times are US Eastern Standard Time.

FRIDAY, MARCH 9

Employment Report February

Time: 8:30 amForecast: 210,000 nonfarm payrolls, 8.3% unemployment rateThe February jobs report is expected to bring payroll growth in excess of 200,000 for three straight months,a feat that has only been produced once before in the current recovery. Jobless claims are holding at theirlowest levels in four years, which points to sustained strength in hiring. Yet at 58.5%, the current share ofthe working aged population who are employed trails the pre-recession level by over 4%, which meanssubstantial progress is still needed to repair the unemployment problem.

Trade Balance January

Time: 8:30 amForecast: -$49.0 billionRising oil prices may lead the January trade deficit to its widest level in seven months. Oil aside, trends inimports are still consistent with robust demand for US goods. Capital goods imports, which are keycomponents in the US production process, expanded 12% annualized last quarter, greatly improving on thethird quarters weak 2% pace.

TUESDAY, MARCH 13

Retail Sales February

Time: 8:30 amForecast: 1.0% overall, 0.7% ex autoFebruary is projected to bring the fastest retail sales growth in five months, led by explosive gains in autosales. Vehicle sales reached the four year high of 15.1 million annualized units last month, which may leadthis quarters GDP result to beat forecasts. Additionally, Februarys 6.7% yearly same store retail gain is theten month high, which shows broader consumer sector strength beyond autos.

Business Inventories January

Time: 10:00 amForecast: 0.6%Inventories are in line to build positive momentum in January after greatly contributing to growth lastquarter. The 1.9% boost to GDP in Q4 was the seven quarter high, showing greater business sector

confidence following the mid-year lull in activity. Though inventories may currently fall short of the $54billion increase to last quarters real growth, the solid trends in retail sales may ultimately make inventories along-term positive for the economy.

FOMC Rate Decision

Time: 2:15 pmForecast: 0-0.25% Fed Funds targetThe second FOMC meeting of the year will likely leave the Federal Reserve in a holding pattern, as improvedhiring contrasts with policymakers cautious outlook. Pressure on the Fed to tighten may mount if recentincome gains continue to allow inflation to exceed the 2% yearly growth target. Yet given the high level ofunemployment, reversal of Fed easing may only develop if inflation runs hot beyond the recent gains fromhigher fuel costs.

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WEDNESDAY, MARCH 14

Import Price Index February

Time: 8:30 amForecast: 0.5%Higher commodity costs may lead the Import Price Index to rise for the second straight month in February.

Yet early March figures show softer price trends. Oil has dropped $5 a barrel from this years high asEuropes slump and lower expectations for Chinese growth are moderating one source of inflation concerns.

THURSDAY, MARCH 15

Producer Price Index February

Time: 8:30 amForecast: 0.4% overall, 0.1% coreFebruarys Producer Price Index is in line to expand at the fastest rate in five months as commodity pricesshot higher. Higher raw materials costs have fed through to other productsthe 3.0% yearly rise of thecore finished goods PPI is the multi-year high. Near-term declines in oil and other commodities mayultimately slow this trend.

FRIDAY, MARCH 16

Consumer Price Index February

Time: 8:30 amForecast: 0.4% overall, 0.2% coreThe Consumer Price Index may expand at the fastest rate in ten months in February, with gasoline pricesleading the way. Though the 2.9% yearly change of the CPI in January breeds discomfort, this value hasfallen from last years high of 3.9%. If the gas-powered gains fade out in the months ahead, inflation risksmay once again appear to be tilted to the downside.

Industrial Production & Capacity Utilization February

Time: 9:15 amForecast: 0.5% industrial production, 78.9% capacity utilizationIndustrial production is forecast to expand in February as indicated by surveys of business activity. Newexport orders in the ISM Manufacturing Index reached the ten month high last month, as external demandstill gives a lift to US production. The steep fall in January durable goods orders was influenced by theexpiration of business tax credits, which implies that the longer-term positive demand trends remain intact.

University of Michigan Consumer Confidence March Preliminary

Time: 9:55 amForecast: 75.2Confidence in the March Michigan survey may hold onto Februarys one year high thanks to the brighteremployment picture. Gasoline prices will weigh on confidence and will ultimately steal much of the fundsfrom the payroll tax cut. Yet strong auto sales show the consumer is gaining resiliency to negative economic

shocks.

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The Week Ahead



EUROPE

By the European staff of Moodys AnalyticsRelease times are Greenwich Mean Time

Focus:Uncertainty over Greece grows

All eyes are on Greece, which is facing increasing obstacles in fighting its sovereign debt crisis. A major threatis that the harsh austerity measures introduced to secure another tranche of support from the EU andInternational Monetary Fund will further eviscerate the countrys economy. Moreover, it is still uncertainthat even if Greece manages to adhere to the new rescue scheme, the countrys debt levels will becomesustainable and reduced to 120% of GDP by 2020, as the assumptions of the plan could prove to be toooptimistic.

The growing uncertainty regarding possible Greek default is not doing any good to the already-shakeneconomy of the euro zone. The region has probably entered recession; GDP contracted in the last quarter of2011 by 0.3% q/q and will most likely fall further in the first three months of this year. Moreover, theFebruary composite Purchasing Managers' Index fell again below the no-change level of 50 and points to afurther slowdown in business activity.

The euro zone industrial production data coming out next week will show a continued slowdown in theregion's manufacturing sector, which we expect to shrink 0.1% y/y. Also, Italian GDP data will confirm thatthe regions third largest economy entered recession at the end of 2011, with its output contracting for asecond consecutive quarter. Moreover, the ZEW Indicator of Economic Sentiment, after a short-livedrebound in February, will most likely return to more negative territory, indicating a weaker outlook. At thesame time, because of high energy prices, the euro zone's inflation is expected to have remained elevated atthe beginning of this year and jumped to 2.7% y/y in February.

FRIDAY, MARCH 9

Germany Consumer Price Index February

Time: 7:00 a.m. GMTForecast: 2% y/yGerman inflation remains relatively contained. The national CPI fell 0.4% m/m but rose 2.1% y/y in January,while the EU-harmonized measure of consumer prices increased 2.3% y/y. The European Central Bank haskept rates at 1% because of the deteriorating euro zone outlook, but the price level has not been affected.We expect only a modest rise in consumer prices, as the German economy slides into recession because ofthe euro zone debt crisis.

France Industrial Production January

Time: 7:45 a.m. GMTForecast: 0.2% m/mFrench industrial production likely rose slightly in January after a large fall the previous month. However,demand for French products likely remained under pressure from fiscal tightening at home and in key

European trading partners. The purchasing managers' index for manufacturing, a leading indicator ofproduction, was in the territory associated with contraction in January for the sixth month.

Germany Foreign Trade January

Time: 8:05 a.m. GMTForecast: 13 billionThe German trade surplus fell to 13.9 billion in December from a revised 14.9 billion a month earlier. Weexpect the sovereign debt crisis to affect Germany further this year. Slowing exports will drag on the balancein the coming months as key trade partners in the euro zone and the UK face recession. The Germaneconomy contracted 0.2% q/q in the last quarter of 2011, and we expect it to grow a modest 0.3% for 2012as a whole.

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Spain Retail Sales JanuaryTime: 8:05 a.m. GMTForecast: -7% y/ySpanish real retail sales fell 6.2% in year-ago terms in December, following a 7.3% drop in the previousmonth. Retail sales will be weak in the coming months. The Spanish economy slipped into a recession in thefourth quarter of 2011 and will likely contract for most of this year. This will put upward pressure on alreadyelevated unemployment. Wage growth will also be muted. Household wealth is being further eroded by thedownward correction in property prices.

Italy Industrial Production January

Time: 9:00 a.m. GMTForecast: 0.3% m/mMoody's Analytics expects Italian production to weaken in coming months as fiscal tightening, fallingexports and tight credit weigh on demand. Further deterioration is consistent with Italys manufacturingpurchasing managers' index, which remained in contractionary territory for sixth month in January. The risein the PMI to 46.8 from 44.3 in December reflects mainly slower contraction in new orders.

United Kingdom Producer Price Index February

Time: 9:30 a.m. GMTForecast: 4.3% y/yUK producer price pressures have eased in recent months. The output price measure rose 4.1% y/y in

January, down from a 4.8% increase the previous month. In month-ago terms, prices rose 0.5%. Meanwhile,the input price measure also rose 0.5% m/m. In annual terms, input prices gained 7% y/y, down from 8.9%previously. A renewed uptick would not be surprising in February given the sharp rise in the price of Brentcrude, which averaged around 120 per barrel during the month, up from around 110 in January.

United Kingdom Industrial Production January

Time: 9:30 a.m. GMTForecast: 0.3% m/mUK industrial production rebounded in December, driven by manufacturing. Output rose 0.6% m/m,reversing the 0.6% contraction reported in November. In annual terms, output shrank 3.3%, adding to the3.6% contraction reported previously. With the purchasing managers' index back in expansionary territory inJanuary, continued production gains may also be reported during the month. Nonetheless, the outlook forUK manufacturing in 2012 is downbeat, with domestic and foreign demand expected to weaken as the UK

and key euroland trade partners fall back into recession.

United Kingdom Foreign Trade January

Time: 9:30 a.m. GMTForecast: -8.1 billionThe UK foreign trade deficit narrowed notably in the final month of 2011 driven primarily by a strong fall inimports. The deficit came in at 7.1 billion, following a revised 8.9 billion deficit in November. The firmly indeficit will persist through 2012. Although the UK economys slide into recession will help cool demand forimports, weaker exports will drag on the balance as euroland trading partners also experience recession.

MONDAY, MARCH 12

Germany House Price Index February

Time: 10:05 a.m. GMTForecast: 5.6%German house prices declined in January, even though they increased in year-to-year terms. Prices for newhomes fell 0.5% m/m but rose 6.2% y/y, following a 7.1% y/y increase in December. Germany is alreadyaffected by the sovereign debt crisis, and we expect weaker economic growth in the near future. In addition,constrained household finances are weighing on demand, helping to reduce prices further.

Italy GDP Fourth Quarter 2011

Time: 11:00 a.m. GMTForecast: -0.7%

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Italys economy slipped back into recession at the end of 2011, according to preliminary estimates. Outputdropped 0.7% q/q in the fourth quarter, following a 0.2% decline in the previous stanza. Fiscal tightening,rising unemployment, tightening credit conditions, and deteriorating exports will weigh on demand in thecoming months. We expect the economy to contract 1% this year but to increase 0.7% in 2013. Risks to theoutlook are weighted to the downside, as the government will be forced to announce additional fiscalausterity plans to improve its fiscal stance.

OECD Composite Leading Indicators January

Time: 12:25 p.m. GMTForecast: 100.6The OECD composite leading indicators inched higher to 100.4 in the final month of 2011 from 100.2 amonth earlier. We expect further improvements in the coming months on the back of the good start to2012 by the U.S. Nevertheless, many key individual country measures are showing below-trend growth.Problems in the euro zone will remain a key risk to the global economy in 2012.

World Moody's Analytics Survey of Business Confidence 3/9/2012

Time: 3:00 p.m. GMTIn the previous survey, global businesses remained guarded, consistent with where sentiment has been sincethe end of last year. Confidence has recovered from the hit it took last summer during the flare-up of theEuropean debt crisis and the political spectacle in the U.S. over raising the Treasury debt ceiling, but itremained subdued. Businesses considered current economic conditions to be very good, but they were much

less upbeat when responding to specific questions regarding hiring and investment. The recent surge in oilprices has yet to affect pricing pressures. The confidence survey results have been consistent with a globaleconomy that is expanding at the low end of its potential.

TUESDAY, MARCH 13

Russian Federation Foreign Trade January

Time: 5:00 a.m. GMTForecast: US$21.7 billionRussias merchandise trade balance reported a surplus of US$20.4 billion in December, up from a revised$17.01 billion in the previous month. Exports growth slowed with weakening global demand, while importgrowth also slowed in a year-ago terms. Exports growth will continue to slow in the coming months, putting

downward pressure on the trade balance. Meanwhile, slower import growth later this year amid a weakerdomestic environment will prevent a sharp fall in the balance.

France Consumer Price Index February

Time: 7:30 a.m. GMTForecast: 2.7%Frances EU-harmonized annual inflation rate is expected to have increased in February because of strongercost-push pressures. The price of Brent crude oil surged during the month after Iran halted exports to anumber of European countries. The oil price remained above its level in the same month last year, and thegap widened compared with January, putting upward pressure on annual energy prices. However, pressuresdriven by domestic demand likely weakened, as Moodys Analytics expects that the French economy wentinto a mild recession at the start of this year.

Spain Consumer Price Index February

Time: 9:05 a.m. GMTForecast: 1.9%Spanish consumer prices rose 2% y/y in January, down from a rise of 2.4% y/y in December. On a month-ago basis, they contracted 1.1% in January after increasing 0.1% in the previous month. Tensions over theEuropean debt crisis and an economy in recession will help dampen inflation pressures in the comingmonths. Core inflation increased 1.3% y/y in January, down from a 1.5% increase in the previous month.

United Kingdom Foreign Trade January

Time: 9:30 a.m. GMTForecast: -8.1 billion

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The U.K. foreign trade deficit narrowed notably in the final month of 2011, driven primarily by a strong fall inimports. The deficit came in at 7.1 billion, following a revised 8.9 billion deficit in November. The deficitwill persist through 2012. Although the U.K. economys slide into recession will help cool demand forimports, weaker exports will drag on the balance as euroland trading partners also experience recession.

Italy Consumer Price Index February

Time: 10:05 a.m. GMTForecast: 3.4%

According to preliminary estimates, the EU-harmonized consumer price growth in Italy remained at 3.4%y/y in February. With the Italian economy in recession, inflation pressure should ease in the coming months.On a year-ago basis, GDP contracted 0.5% in the fourth quarter after growing 0.2% in the previous stanza.We expect the economy will contract further in the first half of this year. However, should crude oil pricesremain elevated, price growth will start to accelerate later this year.

Euro Zone, Germany ZEW Indicator of Economic Sentiment March

Time: 11:00 a.m. GMTForecast: -18.5Investor confidence improved sharply in February. The euro zone ZEW indicator of economic sentimentindex increased to -8.1 from -32.5 a month earlier, while the measure for Germany rose to 5.4 from -21.6.Nevertheless, the outlook is weak as a number of euro area countries are in a recession already, andindustrial production, industrial orders and retail sales point to a slowdown in the German economy.

WEDNESDAY, MARCH 14

United Kingdom Employment Situation February

Time: 10:30 a.m. GMTForecast: 8.5% unemployedThe headline ILO-harmonized unemployment index for the U.K. held at 8.4% in the three months toDecember. The national claimant count jobless rate, which is a month ahead of the ILO data, wasunchanged at 5% in January. Nevertheless, the labor market is deteriorating, and unemployment is expectedto head higher as the U.K. slips back into a mild recession.

Euro Zone Consumer Price Index FebruaryTime: 11:00 a.m. GMTForecast: 2.7%The euro zones consumer price growth accelerated to 2.7% in February from 2.6% in the previous month,according to Eurostat's preliminary estimate. The euro zone's slip back into recession, combined with thesovereign debt crisis, could dampen inflation pressures in the coming months. However, should crude oilprices remain elevated, price growth will start to accelerate later this year, increasing the risk of workersseeking higher wages as compensation.

Euro Zone Industrial Production January

Time: 11:00 a.m. GMTForecast: -0.1%Euro zone industrial production contracted 1.1% in December from the previous month, when it remainedunchanged. In annual terms, output contracted 2% in December, following 0.1% growth in the previousmonth. Industrial production will remain weak through 2012. The January and February purchasingmanagers' indexes for euro zone manufacturing held in contraction territory.

THURSDAY, MARCH 15

Russian Federation Government Finance January

Time: 5:00 a.m. GMTForecast: RUB500 billion

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In 2011, the consolidated budget of Russia's federal, regional and local governments, as well as those of thestate social funds, posted a surplus of RUB848.8 billion. High oil prices have been extremely beneficial forRussia, allowing a budget surplus in 2011, and part of oil- and gas-related revenues was used to rebuild thereserve fund. Nevertheless, Russias vulnerability to oil-price shocks increased further because of the weakerglobal economic outlook and because the oil price needed to balance the budget has risen.

FRIDAY, MARCH 16

Italy Foreign Trade January

Time: 10:05 a.m. GMTForecast: -2.5 billionItaly's merchandise trade balance shifted back into surplus in December. Rising exports, mainly to non-European countries, and weakening imports were the main drivers. The country reported a not seasonallyadjusted surplus of 1.4 billion, following a 1.6 billion shortfall in November. The trade balance, however,will deteriorate in the coming months as major fiscal consolidation throughout the euro zone dampensforeign demand for Italian products.

Euro Zone External Trade JanuaryTime: 11:00 a.m. GMTForecast: -16.2 billion

The euro zones not seasonally adjusted trade balance is expected to have deteriorated in January fromDecember and relative to the same month last year. Major fiscal tightening throughout the euro zone anduncertainty about officials' ability to resolve the sovereign debt crisis likely weighed on exports because themajority of external trade is intraregional. Such a weakening of exports would have put downward pressureon the trade balance. In addition, the trade balance is typically in deficit in January because of seasonalfactors.

Italy Balance of Payments January

Time: 11:00 a.m. GMTForecast: -4.5 billionItalys current account balance reversed in December. The country reported a not seasonally adjustedsurplus of 400 million, following a 3.4 billion shortfall in November. However, the current accountbalance will remain under pressure in the coming months as major fiscal consolidation throughout the euro

zone weighs on exports, while falling imports due to weakening domestic demand should improve the tradebalance somewhat.

Russian Federation Industrial Production February

Time: 2:00 p.m. GMTForecast: 3.5%Annual growth in Russia's industrial production regained momentum in January. Factories, mines andutilities increased output by 3.8% y/y, following a 2.5% increase in December. While production acceleratedin manufacturing, output growth slowed in mining and quarrying and fell further in energy, gas and watersupply in year-ago terms. External weakness remains an important downside risk, but still-robust domesticdemand will keep supporting industry in the opening months of this year.

Russian Federation Producer Price Index February

Time: 2:05 p.m. GMTForecast: 8.1%Russian producer prices fell 0.2% m/m and rose 8.4% y/y in January, after falling 0.1% m/m and rising14.3% y/y in December. Prices in manufacturing and utilities led producer price declines in January, whileprices in mining and quarrying rose. Producer prices are expected to continue their downward trend in thecoming months, while businesses' ability to push through costs to consumers will be limited.

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ASIA-PACIFICBy Katrina Ell and the Asia-Pacific staff of Moodys AnalyticsRelease times are Greenwich Mean Time

Industrial production will likely be hampered by the soft landing across the region. Production in India andthe Philippines is expected to remain weak, while Malaysia and Japan should show some signs ofimprovement. Elsewhere, the remaining bits of Chinese data out this week will likely reveal an improvementin domestic conditions.

Elsewhere, we expect the flurry of Singaporean data to show a moderate recovery from Lunar New Yearseasonal affects. However, the city-state will face significant headwinds from the softness in globalelectronic and tech demand.

FRIDAY, MARCH 9

Australia Foreign Trade January

Time: 12:30 a.m. GMTForecast: A$1.9 bilExports received a boost from slightly higher commodity prices in January, after declining since the thirdquarter. Coupled with customs data showing imports eased over the month, the trade balance likelywidened in January. For the foreseeable future, the import bill will be lifted by capital goods; domesticproduction is insufficient to meet the needs of the resources boom, and imports are filling the gap.

China Consumer Price Index February

Time: 1:30 a.m. GMTForecast: 3.7%Chinese consumer prices likely rose 3.7% y/y in February, a deceleration from Januarys 4.5%. Lunar NewYear festivities in January led food prices higher, causing a spike in the headline rate. With inflation likely totrend downward, policy initiatives will encourage growth.

China Producer Price Index February

Time: 1:30 a.m. GMTForecast: 0.1%Producer prices were likely flat in February, after rising 0.7% y/y in January. Sustained easing in globalcommodity prices has driven producer-price disinflation since mid-2011. We expect this to persist throughthe first half, f lowing through to consumer prices.

China Fixed Asset Investment February

Time: 5:30 a.m. GMTForecast: 19%January and February data, combined to remove Lunar New Year distortion, should show fixed-asset

investment decelerated early in 2012, from 23.8% in the year to December. Fixed-asset investment has beengradually slowing since mid-2011 thanks to tighter policy. With inflation an easing concern, the governmenthas shifted to a pro-growth stance, which will support fixed-asset investment in the coming months.

China Industrial Production FebruaryTime: 5:30 a.m. GMTForecast: 12.5%January and February data, combined to offset Lunar New Year distortions, should show industrialproduction mildly decelerated early in 2012, from 12.8% y/y in December. Subsidies on a number ofconsumer goods in 2011 lifted the retail sector and flowed through to higher production. With their

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expiration, we expect softening in the opening months of 2012. Easier monetary conditions will supportindustrial production growth in coming months and support a soft landing in the economy.

China Retail Sales February

Time: 5:30 a.m. GMTForecast: 17.3%January and February data, combined to offset Lunar New Year distortions, will show retail spending cooledafter a rebate for white goods expired. Retail spending held up well through tighter monetary settings in the

second half of 2011. Now that the government has shifted to a pro-growth stance, retail sales will continuearound their trend pace of 17% y/y.

MONDAY, MARCH 12

China Monetary Aggregates FebruaryTime: 11:00 p.m. GMTForecast: 13.5%Monetary aggregates should show some sign of a turning point in February in line with the reserve ratio cut,the passing of the Lunar New Year, and window guidance to banks to lend more to local governments.Money supply growth will likely have accelerated to above 13% while new lending should have matched orexceeded January's CNY738 billion.

China Trade FebruaryTime: 11:00 p.m. GMTForecast: -US$8 billionChina's trade balance likely fell into deficit in February, although seasonal distortions increase uncertainty. InJanuary the surplus jumped because of a drop in imports, helped by the Lunar New Year. We expect thisreversed in February as conditions in the mainland suggest relatively healthy demand for commodities andother imports.

Japan Machinery Orders JanuaryTime: 12:50 a.m. GMTForecast: 6%Machinery orders likely rose 6% in January, reversing most of Decembers 7.1% decline. Capital investmentplans are rising as the reconstruction effort gains momentum. Moreover, small-business sentiment is turningup, and producers forecast a pickup in manufacturing output, suggesting the economy is growing again.

Malaysia Industrial Production JanuaryTime: 5:01 a.m. GMTForecast: 4.1%Malaysias industrial production is set to start 2012 strongly. On a year-ago basis, production likelyexpanded 4.1%, but this is partially because of low base effects. Production in the export-led economy facesstiff headwinds from weak Western demand and the soft landing across the region. Yet, negating part of thishas been the resilience at home, driven by strong household and investment activity.

Japan Consumer Confidence February

Time: 6:00 a.m. GMTForecast: 40Japanese consumer confidence likely nudged higher in February, marking a third straight gain. Confidence isreceiving support from recent job and income gains. Stable financial markets, aggressive monetary easing,and a declining yen are all buoying the economic outlook.

India Industrial Production JanuaryTime: 6:30 a.m. GMTForecast: 2.1%Indias industrial sector cooled sharply through the second half of 2011 as weak domestic demand and adeteriorating global backdrop weighed on production. Output is barely rising on a year-ago basis and this islikely to persist through the first half of 2012. The uptick in January exports gives some upside risk to the
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January production figure.

OECD Composite Leading Indicators JanuaryTime: 12:25 p.m. GMTForecast: 100.6The OECD composite leading indicators nudged higher to 100.4 in the final month of 2011 from 100.2 amonth earlier. We expect further improvements in the coming months on the back of the good start to2012 by the U.S. Nevertheless, many key individual country measures are continuing to show below-trend

growth. Problems in the euro zone will remain a key risk to the global economy in 2012.

World Moody's Analytics Survey of Business Confidence 3/9/2012Time: 3:00 p.m. GMTIn the previous survey global businesses remained guarded, consistent with where sentiment has been sincethe end of last year. Confidence has recovered from the hit it took last summer during the flare-up of theEuropean debt crisis and the political spectacle in the U.S. over raising the Treasury debt ceiling, but itremained subdued. Businesses considered current economic conditions to be very good, but they were muchless upbeat when responding to specific questions regarding hiring and investment. Pricing pressures haveyet to be impacted by the recent surge in oil prices. The confidence survey results have been consistent witha global economy that is expanding at the low end of its potential.

TUESDAY, MARCH 13

Japan Industry Activity Indexes JanuaryTime: 12:50 a.m. GMTForecast: 0.8%After growing a strong 1.4% in December, Japanese services activity likely rose a milder, albeit still-solid0.8% in January. Jobs and incomes rose in January, supporting wholesale and retail trade. Recovery in supplychains following Thailands floods is driving improvement in the auto and electrical industries.

Australia Housing Finance JanuaryTime: 1:30 a.m. GMTForecast: -0.2%Australian housing finance likely retreated in January, after rising 2.3% m/m in December. We expect first-

time homebuyers in New South Wales moved property purchases forward before the stamp duty exemptionfor properties priced up to A$600,000 ended on 31 December. Elsewhere, weak auction clearance resultsand subdued consumer confidence suggest caution in the opening months of 2012. We expect loosermonetary settings coupled with soft house price growth will gradually encourage potential homebuyers backinto the market in 2012.

Philippines Industrial Production JanuaryTime: 3:30 a.m. GMTForecast: -9.1%Electronics production in January was affected by Lunar New Year celebrations, as China is a key market.Food manufacturing improved as the recovery from earlier weather damage continues.

Japan Monetary Policy March

Time: 6:00 a.m. GMTForecast: 0.05%The Bank of Japan expanded its quantitative easing program by 10 trillion to 65 trillion in February andnamed an inflation goal of 1% to fight deflation and support the countrys recovery. The moves are working;the yen has declined sharply against the U.S. dollar and euro in recent weeks, supporting business confidenceand export competitiveness. The target interest rate remains locked at 0% to 0.1%.

WEDNESDAY, MARCH 14

South Korea Employment February
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Time: 12:00 a.m. GMTForecast: 3.5% UnemployedLabor demand in Korea remained favorable through the second half of 2011 and into January, even as globaldemand and local production slowed. There may be some labor hoarding as firms expect the current lull inglobal demand to pass fairly soon. However, the period from January to March often has a spike in labormarket entrants as school leavers and university graduates (who finished their studies in November) enterthe labor force. This can lead to unpredictable spikes in the unemployment rate during these months, sodon't worry too much if unemployment jumps to 4%.

India Wholesale Price Index FebruaryTime: 7:30 a.m. GMTForecast: 6.5%Inflation has turned in India, with the closely watched wholesale price index easing sharply through thefourth quarter and into January. This is likely to continue as demand remains weak, while food price inflationhas turned, helped by year-ago base effects and decent rainfalls. The recent runup in global oil prices isunlikely to have much of a domestic impact where prices are still controlled.

THURSDAY, MARCH 15

Singapore Employment 2012Q1

Time: 3:00 a.m. GMTForecast: 2.1% UnemployedSingapore's labor market remains healthy and has defied expectations of a softening for some time. Someincrease in the unemployment rate from historically low rates is still expected for the fourth quarter givenlacklustre industrial production in the period. A dimmer regional outlook likely also slowed hiring in tourist-related services.

Singapore Retail Sales JanuaryTime: 6:00 a.m. GMTForecast: 3.5%Seasonal factors such as the Lunar New Year will make January's reading less useful, but some trends can stilbe discerned. Domestic demand in the city remains relatively healthy, abstracting away from governmentpolicy-distorted motor vehicle sales, and retail spending should continue growing at a sustainable pace in

the first half of 2012.

FRIDAY, MARCH 16

Singapore Foreign Trade FebruaryTime: 1:30 a.m. GMTForecast: 12%Nonoil domestic exports for Singapore fell more than expected in January but likely rebounded in Februaryas the Lunar New Year ended. That said, electronics exports remain weak because of supply chain problemsfrom Thailand and general weak global demand, and will drag on overall exports in the first half of the year.
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The Long View

The US:

By John Lonski and Ben Garber, Moodys Capital Markets Research Group

If the outlook improves, the funding of acquisitions and shareholder

compensation will lend more support to corporate borrowings now ample pace

March 9, 2012

CREDIT SPREADS

As measured by Moody's long-term average corporate bond yield, the recent investment grade corporatebond yield spread of 128 bp eclipsed its 122 bp mean of the two previous economic recoveries. Cash flowgrowth amid corporate borrowing restraint, as well as an accommodative monetary policy, is likely tonarrow this spread by at least 5 bp by year-end 2012.

The recent high-yield bond spread of 615 bp is much wider than what otherwise might be inferred fromFebruary 2012's US high-yield default rate of 2.3% and its projected rise to 3.1% by September-October2012. A continued narrowing by the high-yield bond spread requires more confident outlooks for revenuegrowth and sufficient access to financial capital in the event of an adverse systemic shock. Owing to thefinancial systems importance to accessibility to reasonably priced liquidity, the high yield bond spread ismore likely to return to its 435 bp average of May 2011 if the investment grade bank bond yield spreadnarrows substantially from its recent 246 bp. For example, February-May 2011s 449 bp average for the highyield bond spread was joined by a 168 bp average for the US investment-grade financial company bondspread.

DEFAULTS

Moody's forecasts that the US trailing 12-month high-yield default rate will rise from Decembers 2011smost recent bottom of 1.8% and Februarys 2.3% to 3.1% by September-October 2012. Profits growth andcorporate borrowing restraint should limit defaults for now.

US CORPORATE BOND ISSUANCE

After sinking by 27% annually in 2010, US-dollar denominated investment grade corporate bond issuancegrew by 6% in 2011, while the annual increase by the sum of high yield bond offerings plus new bank loanprograms slowed from 2010s 106% surge to 2011s 5% rise. However, the latter owed much to a 25%increase by high yield bank loan programs. The amount of dollar-denominated high yield corporate bondissuance plunged by 15% annually during 2011.

For all of 2012, IG bond issuance may increase by 12% to $954 billion, while high-yield bond issuance couldgrow by 15% to $301 billion. The forecasts implicitly assume the avoidance of extremely turbulent financialmarkets.

In terms of year to year percent changes, dollar-denominated issuance of investment-grade bonds isexpected to rise by 2% for a second straight quarter in Q1-2012, while the decline by total high yieldborrowings (bonds plus newly-rated bank loan programs) narrows from Q4-2011s -40% to Q1-2012s -22%.

The year-over-year percent increases by corporate bond issuance through the first 10 weeks of 2012 were26.8% for USD-denominated investment-grade, 1.9% for USD-denominated high-yield, 6.3% for euro-

denominated investment-grade, and 332.8% for euro-denominated high-yield.Refinancings of both bonds and leveraged loans should be the primary drivers of bond issuance in 2012. Agrowing number of bond issues and newly-rated bank loan programs will fund acquisitions and shareholdercompensation, but only after financial markets stabilize sufficiently. Companies will resort to acquisitionsand divestitures in order to better cope with the USs slow growing economy.

US ECONOMIC OUTLOOK

In response to a further climb by business sales, jobs growth should continue, albeit sometimes at a subparpace. The Federal Reserves efforts to contain long term borrowing costs will help to contain downsideeconomic risks. Also, any slowing of economic activity is likely to prompt a remedial drop by Treasury bondyields. In view of how persistently high unemployment will soften wages, low inflation should help to rein in

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Treasury bond yields. If Europes difficulties intensify or the price of crude oil skyrockets to a new recordhigh, the 10-year Treasury yield could sag to 1.5%. Energy costs and Europes sovereign debt issuesconstitute the biggest threats to the adequacy of economic growth going forward. The potential loss ofeconomic activity to spending cuts and tax hikes by financially-stressed state and local governments alsodeserves consideration.

By Enam Ahmed and the European staff of Moodys AnalyticsMarch 9, 2012

EUROPE

GDP in the single-currency area currency contracted by 0.3% in the final months of 2011 from the previousstanza when it rose by 0.1%. This is the first decline in value added since the second quarter of 2009.Softening domestic demand and deteriorating external conditions were behind the contraction. The weakgrowth figures are likely to be extended through the first half of 2012. The euro zone has already probablyslipped back into a technical recession on the heightened tensions over the European debt crisis and slowingglobal demand. With the outlook weak, the European Central Bank cut its key policy rate in November and

December and extended more credit facilities to the banking sector. We expect the ECB to hold its keypolicy rate at 1% through 2012.

The UK economy contracted by 0.2% q/q in the fourth quarter of 2011, after growing by 0.5% in theopening stanza. Output has effectively remained unchanged since the third quarter of 2010, which points toan underlying weakness in the recovery. There is a high risk the economy will contract again in the currentquarter. Fiscal consolidation at home will weigh further on domestic demand; while weakness in key tradingpartners will dampen exports. Around half of all UK exports go to the euro zone, where governments areimplementing harsh austerity measures. The Bank of England continues to hold its key policy rate steady atthe record low of 0.5% on concerns about the UK economic recovery. The central bank expanded its assetpurchase program target by a further 50 billion in February following a 75 billion increase in October onfears over the outlook. This takes the central banks asset purchase target now stands at 325 billion.

By the Sydney office of Moodys AnalyticsASIA PACIFIC

March 9, 2012

The brighter tone from this years purchasing managers surveys suggests the global economic recovery isslowly gaining momentum. Global manufacturing is turning up in 2012 after slowing in late 2011. Accordingto Japanese manufacturers, which account for about 12% of global factory output, these gains should extendthrough March. From there onwards, recent aggressive monetary easing from the worlds central banks willgive a leg up to global demand, cementing a stronger second-half performance. Stability in financial marketsforeshadows improvement in consumer and business confidence, which is key to a self-sustaining globalexpansion. Tempering optimism is Europes debt crisis; any flare-up and all bets are off.

Nevertheless, incoming data suggest the U.S. recovery is improving, the euro zone is stabilising, and Asia-Pacific economies are proving resilient. Manufacturing surveys point to a pickup in global GDP growth. Therecent data suggest Asian exports are poised to pick up, which will boost GDP growth as the year progressesThe book-to-bill ratio, a proxy for global semiconductor demand, is nearing its neutral rate of 1, indicatingAsias tech manufacturers should post solid production gains ahead. The rise in U.S. manufacturing orders,which tend to lead the Asian export cycle by about six months, corroborates this view. As this grows clearer,expect the regions monetary bias to shift from easing to neutral.

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Ratings Round-Up



Ratings Round-UpBy Njundu Sanneh

US Positives Surge; Europe Calm

A surge in the number of US upgrades this week brought their proportion to 58%, the highest in the past sixmonths and the first time above 50% since early January. The eleven upgrades included energy companiesConcho Resources Inc., Continental Resources Inc., and Exelon Corporation. The 58% follows on last weeks44%, which was also a significant gain on the 30% vicinity for many weeks prior to that.

In Europe rating change activity was fairly quiet with only six companies affected. The downgrade of theGovernment of Greece may mean an increase in the number of rating changes next week..

FIGURE 1

Rating Changes - US Corporate & Financial Institutions: Favorable as % of Total Actions

0.0

0.2

0.4

0.6

0.8

1.0

0.0

0.2

0.4

0.6

0.8

1.0

Sep00 Feb02 Jul03 Dec04 May06 Oct07 Mar09 Aug10 Jan12

By Count of Actions By Amount of Debt Affected

* Trailing 3-month average

Source: Moody's

FIGURE 2Rating Key

BCF Bank Credit Facility Rating MM Money-MarketCFR Corporate Family Rating MTN MTN Program RatingCP Commercial Paper Rating Notes NotesFSR Bank Financial Strength Rating PDR Probability of Default RatingIFS Insurance Financial Strength Rating PS Preferred Stock RatingIR Issuer Rating SGLR Speculative-Grade Liquidity RatingJrSub Junio r Subordinat ed Rating SLTD Short- and Long-Term Deposit Rating

LGD Loss Given Default Rating SrSec Senior Secured RatingLTCF Long-Term Corporate Family Rating SrUnsec Senior Unsecured RatingLTD Long-Term Deposit Rating SrSub Senior SubordinatedLTIR Long-Term Issuer Rating STD Short-Term Deposit Rating

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FIGURE 3Rating Changes: Corporate & Financial Institutions - US

D ate C om pany Sector Rating A mo unt($ M illion) Up /D o wnOl dLT DRating

N ewLT DRatingO ldST DRating

N ewST DRatingO ldFS R N ewFS R Ol dLG D N ewLG D I G /S G

2/29/12 ALTRA HOLDINGS, INC. Industrial SrSec/LTCFR/PDR 210 U B1 Ba3 SG

2/29/12 AMEREN CORPORATION Utility SrUnsec/BCF 825 D Ba1 Ba2 SG

2/29/12 NEW ENTERPRISE STONE & LIME CO., INC. Industrial Srunsec/LTCFR/PDR 250 D B3 Caa1 SG

3/1/12 BAKER & TAYLOR ACQUISITIONS CORP. Industrial SrSec/LTCFR/PDR 165 D B3 Caa1 SG

3/1/12 CLEAR CHANNEL COMMUNICATIONS, INC. Industrial LGD 2,500 U LGD-4 LGD-3 SG

3/1/12 MEDICAL PROPERTIES TRUST, INC. Financial SrUnsec/LTCFR 450 U Ba2 Ba1 SG

3/1/12 NORANDA ALUMINUM HOLDING CORPORATION Industrial LGD D LGD-2 LGD-3 SG

3/1/12 POLYMER HOLDINGS LLC Industrial SrUnsec/SrSec/LGD 250 U Ba3 Ba1 LGD-3 LGD-2 SG

3/2/12 EXELON CORPORATION Industrial SrUnsec/LTIR 6,088 U Baa1 A3 IG

3/2/12 TUBE CITY IMS CORP. Industrial SrSec/LTCFR/PDR/BCF 300 U B1 Ba3 SG

3/5/12 AFFIRMATIVE INSURANCE HOLDINGS, INC. Financial SrSec/LTCFR/ISFR/BCF D Ba3 B1 SG

3/5/12 CASELLA WASTE SYSTEMS, INC. Industrial SrSec/LTCFR/PDR/SrSub 400 D B2 B3 SG

3/5/12 CONCHO RESOURCES INC. Industrial SrUnsec/LTCFR/PDF 1,500 U B1 Ba3 SG

3/5/12 CONTINENTAL RESOURCES, INC. Industrial LTCFR/PDF 1,800 U Ba3 Ba1 SG

3/5/12 PINNACLE ENTERTAINMENT, INC. Industrial LTCFR/PDR 350 U B2 B1 SG

3/5/12 PINNACLE ENTERTAINMENT, INC. Industrial LGD 450 D LGD-3 LGD-4 SG

3/5/12 PNC FINANCIAL SERVICES GROUP, INC. Financial LTD D A1 A2 IG3/5/12 RESTAURANT HOLDING COMPANY, LLC Industrial LTCFR/PDR/SGL 218 U Caa2 B3 SG

3/6/12 LIFE TECHNOLOGIES CORPORATION Industrial SrUnsec 2,300 U Ba1 Baa3 SG

Source: Moody's

FIGURE 4 Rating Changes: Corporate & Financial Institutions EUROPE

Date Company Sector Rating Amount($ Million)Up/

DownOldLTD

RatingNewLTD

RatingOldSTD

RatingNewSTD

RatingOldFSR

NewFSR IG/SG

2/29/12 AKTIA P.L.C. Financial SrUnsec/SLTD/BCF/MTN 26 D A1 A3 P-1 P-2 C C- IG

3/1/12 PEUGEOT S.A. Industrial SrUnsec/LTCFR/ST/NTN 5,843 D Baa3 Ba1 P-3 NP IG

2/29/12 DFS DEUTSCHE FLUGSICHERUNG GMBH Industrial SrUnsec/MTN 70 D Aaa Aa3 IG

3/1/12 WESTLB AG Financial BFSR/JrSub/PS 749 D B3 Ca SG

2/29/12 ELAN CORPORATION, PLC Industrial SrUnsec/LTCFR/PDR 625 U B2 B1 SG

3/1/12 SAVINGS BANK OF UKRAINE Financial SrUnsec/LTD 149 D A2 A3 IG

Source: Moody's

CountryFINLAND

FRANCE

GERMANY

GERMANY

IRELAND

UKRAINE

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Market Data



Market Data

0

200

400

600

800

0

200

400

600

800

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Spread (bp) Spread (bp)

Aa2 A2 Baa2

Source: Moody'sSource: Moody's

Figure 1: 5-Year Median Spreads-Global Data (High Grade)

0

400

800

1,200

1,600

2,000

0

400

800

1,200

1,600

2,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Spread (bp) Spread (bp)

Ba2 B2 Caa-C

Source: Moody's

Figure 2: 5-Year Median Spreads-Global Data (High Yie ld)

Spreads

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Market Data



CDS Movers

CDS Implied Rating RisesIssuer Mar. 7 Feb. 29 Senior RatingsRange Resources Corporation Baa3 Ba3 Ba3

Embarq Corporation Baa2 Ba1 Baa3

Cellco Partnership Aa2 A1 A2

Valassis Communications, Inc. Ba3 B2 Ba3

Citigroup Inc. Baa3 Ba1 A3

Merrill Lynch & Co., Inc. Ba1 Ba2 Baa1

Procter & Gamble Company (The) Aa2 Aa3 Aa3

Kraft Foods Inc. Aa2 Aa3 Baa2

International Lease Finance Corporation Ba3 B1 B1Merck & Co., Inc. A1 A2 A1

CDS Implied Rating DeclinesIssuer Mar. 7 Feb. 29 Senior RatingsEdison Mission Energy C Caa2 Caa1

K. Hovnanian Enterprises, Inc. C Caa3 Caa3

Bon-Ton Stores Inc., (The) Ca Caa2 Caa2

Radian Group Inc. Ca Caa2 Caa1

Wells Fargo Bank, N.A. Baa1 A3 Aa3

American Express Credit Corporation Baa2 Baa1 A2

DIRECTV Holdings LLC Baa3 Baa2 Baa2

Bear Stearns Companies LLC. (The) Baa2 Baa1 Aa3

News America Incorporated A3 A2 Baa1UnitedHealth Group Incorporated Baa1 A3 A3

CDS Spread IncreasesIssuer Senior Ratings Mar. 7 Feb. 29 Spread DiffEdison Mission Energy Caa1 2,413 1,778 635Hovnanian Enterprises, Inc. Caa3 2,620 2,088 531

K. Hovnanian Enterprises, Inc. Caa3 2,472 1,958 514

Bon-Ton Stores Inc., (The) Caa2 2,012 1,728 284

Radian Group Inc. Caa1 1,870 1,592 279

MGIC Investment Corporation Caa2 1,446 1,291 154

MBIA Inc. B2 865 723 142

Energy Future Holdings Corp. Caa3 2,493 2,357 136

Caesars Entertainment Operating Company, Inc. Ca 1,630 1,515 116Freescale Semiconductor, Inc. Caa1 799 704 95

CDS Spread DecreasesIssuer Senior Ratings Mar. 7 Feb. 29 Spread DiffYRC Worldwide Inc. Ca 2,552 3,161 -610

Range Resources Corporation Ba3 201 426 -225

Valassis Communications, Inc. Ba3 448 536 -88

Residential Capital, LLC Ca 5,255 5,327 -72

Embarq Corporation Baa3 154 215 -61

Travelport LLC Caa2 2,785 2,842 -57

Cleveland Electric Illuminating Company (The) Baa3 152 179 -27

Thomas & Betts Corporation Baa2 72 99 -27

Computer Sciences Corporation Baa1 322 348 -26Joy Global Inc. Baa2 276 301 -25

Source: Moody's, MarkIt

CDS Spreads

CDS Implied Ratings

CDS Implied Ratings

CDS Spreads

Figure 3. CDS Movers - US (February 29, 2012 March 7, 2012)

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Market Data



CDS Implied Rating RisesIssuer Mar. 7 Feb. 29 Senior RatingsItaly, Government of Ba1 Ba2 A3

Natixis Baa3 Ba1 Aa3

Reseau Ferre de France Baa3 Ba1 AaaEksportfinans ASA B1 B2 Ba1

Kommunalbanken AS Aa1 Aa2 Aaa

Bremer Landesbank Kreditanstalt Oldenburg GZ Ba1 Ba2 A2

Hypo Alpe-Adria-Bank International AG Baa3 Ba1 A1

TDC A/S A3 Baa1 Baa2

Yorkshire Building Society Baa3 Ba1 Baa2BAWAG P.S.K. Ba1 Ba2 Baa2

CDS Implied Rating DeclinesIssuer Mar. 7 Feb. 29 Senior RatingsSpain, Government of Ba3 Ba1 A3

Rabobank Nederland Baa2 Baa1 Aaa

BPCE Ba1 Baa3 Aa3

Portugal, Government of Caa2 Caa1 Ba3Banco Bilbao Vizcaya Argentaria, S.A. Ba2 Ba1 Aa3

Instituto de Credito Oficial Ba3 Ba2 A3

Landwirtschaftliche Rentenbank Baa2 Baa1 Aaa

Deutsche Bank AG Baa3 Baa2 Aa3

Alpha Bank AE C Ca Caa2EFG Eurobank Ergasias S.A. C Ca Caa2

CDS Spread IncreasesIssuer Senior Ratings Mar. 7 Feb. 29 Spread DiffGreece, Government of C 22,065 11,593 10,472

National Bank of Greece S.A. Caa2 2,698 2,216 482

Piraeus Bank S.A. Caa2 2,627 2,188 438

EFG Eurobank Ergasias S.A. Caa2 2,477 2,179 299Alpha Bank AE Caa2 2,479 2,238 241

Norske Skogindustrier ASA Caa1 1,646 1,467 179

Spain, Government of A3 399 270 129

Peugeot S.A. Ba1 483 401 82

Banque PSA Finance Baa1 463 391 72Wind Acquisition Finance S.A. B3 1,013 944 69

CDS Spread DecreasesIssuer Senior Ratings Mar. 7 Feb. 29 Spread DiffConvaTec Healthcare E S.A. Caa1 1,059 1,120 -62

DEPFA Bank plc Baa3 445 506 -61

Barry Callebaut Services N.V. Baa3 474 529 -55

Banco BPI S.A. Ba2 953 998 -45

M-real Oyj B3 729 762 -33Campania, Region of Baa2 445 471 -26

Abruzzo, Region of Baa1 416 442 -26

Caixa Geral de Depositos, S.A. Ba2 868 890 -22

Smurfit Kappa Acquisitions B1 372 392 -20Lazio, Region of Baa2 406 422 -17

Source: Moody's, MarkIt

CDS Spreads

CDS Implied Ratings

CDS Implied Ratings

CDS Spreads

Figure 4. CDS Movers - Europe (February 29, 2012 March 7, 2012)

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Market Data



Issuance

FIGURE 5: Market Cumulative Issuance - Corporate & Financial Institutions: USD Denominated

0

200

400

600

800

1,000

1,200

1,400

0

200

400

600

800

1,000

1,200

1,400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Issuance ($B) Issuance ($B)2009 2010 2011 2012

Source: Moody's / Dealogic

FIGURE 6: Market Cumulative Issuance - Corporate & Financial Institutions: EURO Denominated

0

200

400

600

800

1,000

1,200

1,400

0

200

400

600

800

1,000

1,200

1,400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Issuance ($B) Issuance ($B)2009 2010 2011 2012

Source: Moo dy's / Dealogic

FIGURE 7: Issuance: Corporate & Financial Institutions

Investment-Grade High-Yield Total*

Amount Amount Amount$B $B $B

Weekly 41.964 11.015 53.989

Year-to-Date 241.215 72.192 321.861

Investment-Grade High-Yield Total*

Amount Amount Amount$B $B $B

Weekly 15.517 2.364 17.881

Year-to-Date 240.547 12.549 257.790

* Difference represents issuance with pending ratings.

Source: Moody's/ Dealogic

USD Denominated

Euro Denominated

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