Credit Ratings
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FAQ
Frequently Asked Questions
on Sovereign Credit Ratings
What are the sovereign credit rating scales?
The three agencies use different notations for the same underlying ladder. Everything from AAA down to BBB− is investment grade; below that is speculative grade.
| S&P | Moody’s | Fitch | ||
|---|---|---|---|---|
Investment grade | Highest quality | AAA | Aaa | AAA |
| High quality | AA+ | Aa1 | AA+ | |
| AA | Aa2 | AA | ||
| AA− | Aa3 | AA− | ||
| Strong payment capacity | A+ | A1 | A+ | |
| A | A2 | A | ||
| A− | A3 | A− | ||
| Adequate payment capacity | BBB+ | Baa1 | BBB+ | |
| BBB | Baa2 | BBB | ||
| BBB− | Baa3 | BBB− | ||
Speculative grade | Likely to fulfil obligations, ongoing uncertainty | BB+ | Ba1 | BB+ |
| BB | Ba2 | BB | ||
| BB− | Ba3 | BB− | ||
| High credit risk | B+ | B1 | B+ | |
| B | B2 | B | ||
| B− | B3 | B− | ||
| Very high credit risk | CCC+ | Caa1 | CCC+ | |
| CCC | Caa2 | CCC | ||
| CCC− | Caa3 | CCC− | ||
| Near default with possibility of recovery | CC | Ca | CC | |
| C | C | |||
| Default | SD | C | RD | |
| DDD | ||||
| DD | ||||
| D | D |
What is the difference between an outlook and a watch?
An outlook — positive, stable or negative — signals the likely direction of the rating over the medium term, typically six months to two years. It is a bias, not a commitment: most negative outlooks do not end in a downgrade.
A watch (Moody's calls it a review) is a shorter, event-driven signal: an election result, a debt exchange, a sudden financing shock. It says a decision is actively under way and usually resolves within about ninety days.
Which ratings does Sismografe track?
Long-term foreign-currency issuer ratings from S&P, Moody's and Fitch. A sovereign that borrows in its own currency can print to pay, so its local-currency rating is often one or two notches higher; mixing the two in a single figure hides more than it reveals, and the outlooks attached to each can point in opposite directions.
Every rating action is recorded, affirmations included. Where a value is unknown, the cell stays empty rather than being filled in by inference.
Why does the investment-grade threshold matter?
The line sits between BBB− (Baa3) and BB+ (Ba1). It is not a judgement about one extra notch of credit risk so much as an access threshold: index eligibility, central bank collateral frameworks and a large share of institutional mandates are written around it.
Crossing downward turns a sovereign into a fallen angel and forces selling by holders who are not permitted to hold speculative-grade paper — which is why the move in spreads usually runs ahead of the rating action itself.