What Is a Sovereign Credit Rating?

Sovereign credit rating is a credit rating agency's assessment of the willingness and ability of a government to perform its debt obligations as a debtor. At present, the main sovereign credit rating businesses are the three major international rating agencies: Fitch Ratings, Standard & Poor's and Moody's. On the morning of August 6, 2011, Beijing time, Standard & Poor's, one of the three major international rating companies, announced that it had downgraded the U.S. sovereign credit rating from AAA to AA +, and its rating outlook was negative for the first time in nearly a century.

Sovereign credit rating

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Moody's credit ratings range from the highest Aaa to the lowest C, with a total of 21 levels. The rating level is divided into two parts, including

The main credit rating businesses involved are the three major international rating agencies:

On the evening of August 5, 2011, Eastern Standard Time, Standard & Poor's said that it was downgrading the U.S. sovereign credit rating from AAA to AA + due to concerns about the US budget deficit. Prior to the previous decades, the three major rating agencies of Standard & Poor's, Moody's and Fitch have maintained AAA ratings on US sovereign credit. AA + rating means that the US Treasury bond credit level is lower than the UK, Germany, France, Canada and other national debt levels.

Standard & Poor's said that the downgrade of the U.S. sovereign credit rating is mainly due to three reasons. First, the debt situation in the United States is worrying, and the proportion of debt to gross domestic product (GDP) has increased year by year. Third, S & P's confidence in the ability of the US Congress to deal with similar issues in the future has been frustrated.

Standard & Poor's said that there is still the possibility of downgrading the U.S. credit rating within the next 12 to 18 months. "We don't think the recent fiscal austerity agreement between Congress and the government is enough to stabilize the government's medium-term debt situation." ^[2]

US response: S & P rating deposits $ 2 trillion wrong

The US Treasury Department issued a response on the 5th, saying that S & P's rating calculation was wrong with 2 trillion US dollars.

A US Treasury spokesman said the conclusions based on the $ 2 trillion error were clearly incorrect. Earlier, a senior US government official told CNN that Standard & Poor's research on the US government's financial situation was questioned by the government. ^{[2] The} international credit rating agency Standard & Poor's announced on January 26, 2015 that it downgraded Russia's sovereign credit rating from BBB- to BB +, and set its rating outlook to negative. ^[3]

On May 24, 2017, Moody's downgraded China's credit rating from Aa3 to A1, and adjusted its outlook on China from negative to stable. Moody's said that the overall debt level of the Chinese economy is expected to increase further, and at the same time, the reforms being promoted may weaken China's economic growth rate. Moody's predicts that by 2018, China's government debt will rise to 40% of GDP. Marie Diron, deputy head of Moody's sovereign rating team, said that the downgrade was based on multiple factors, including the expectation that China's economic growth would fall to 5% within ten years. Official growth targets are also falling, but to a lesser extent. Therefore, China's increasing dependence on policy stimulus will further increase the level of government debt. ^[4]