Moodys 3Q15 Earnings Call Notes

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This is the first week that we’ve seen issuance pick back up

“This has been a particularly difficult period, which makes our job for the end of the year here a high little bit more difficult to forecast, which is what we’re trying to work through. Now for investment grade bonds, the expectations for October now, is about $126 billion of U.S. issuance in investment grade bonds. It has been very choppy however. Late August and early September had three weeks of zero issuance, and October until this week had been quite light for supply. And only recently, only this week, have we seen issuance pickup. ”

Spreads have come back in

“a lot of this is caused by the spread. Spreads widened out, and in fact now they are 5 basis points higher than their lows in August, and they’ve retraced or come back in 15 basis points from the highs in early October. So it is possible that with spreads coming back in and only being 5 bps up from August, that we could continue to see heavier issuance as we move into November out of the blackout period, and in fact the pipelines look pretty good for next week.”

High yield has been very subdued but spreads have come in from their lows

“High yield is a different story. October month to-date had been about $3 billion and year-to-date about $230 billion, which is down 15%. The market has been quite subdued. September and October were the two lowest volume issuance months in 2016, and the issue here is spreads. And spreads are 40 basis points wider than at the August lows, but they have come in a 100 basis points from their recent highs in October. So you might want to think of this as spreads have come in two-thirds from the recent highs, which is a good trend”

Structured finance pipelines are also good

“I would also note that the pipelines in Structured Finance are good, but the movement through those pipelines is again going to be sensitive to spreads. And so we’ll have to see if spreads continue to move in from where they were earlier in October. Secondly, we still think that the non-U.S. business is going to be probably more challenged overall than the U.S. business through to the end of the year. ”

Volatility in Chinese equity markets hasn’t really affected us, but we could be affected if something happens in areas that have been considered bubbles

“there is certainly been some market volatility in China. It’s been primarily focused on the equity markets. We continue to see growth in our joint- venture and in our cross-border business. So that has not – neither one of those legs of our China strategy had been harmed or had a decline in business as a result of the volatility. What we would be more concerned about is it’s some of the areas where there have been concerns about bubbles such as perhaps property sector or municipal debt in China. If those areas become under more acute stress, and that I think would be a more direct – have a more direct impact on our fixed income business over there.”