Feb 9, 2017

Governments with perfect credit ratings at 15-year low

Fitch Ratings said Thursday that the number of governments around the world with triple-A credit has fallen to its lowest level in 15 years. These bond ratings are like credit scores for governments: they indicate sovereign borrower's creditworthiness so that bond investors know whom to lend money to.

Why it matters: Economic research shows that changes in debt ratings are broadly predictive of sovereign default, and they also serve as a centralized store of information that investors rely on to determine at what rates they'll lend. The low number of AAA countries shows increased strains government budgets have come under fighting the effects of the financial crisis and dealing with the consequences of aging populations and slower economic growth in the wealthy world.

Why it doesn't matter: There's not a lot of evidence that the market places much importance on the difference between AAA and AA-rated countries. When the U.S. was downgraded to AA by S&P in 2011, it's borrowing costs actually fell.

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