U.S Credit Rating

U.S. CREDIT RATING Compared to the World When the consumer era of easy credit came to an end in 2008, the federal government stepped in and tried to solve it with a burst of spending. But now the government's era of easy credit may be coming to an end, too. In March, it was reported that the U.S. is risking its AAA credit rating. Here's a look at how the U.S. compares to other countries and how a downgrade would impact the country. TOP 20 OF SOVEREIGN CREDIT RATINGS Sovereign credit ratings are reported by Dagong Global, a Chinese ratings agency. In the issue of fairness, the ratings from New York-based Standard & Poor's are included below the Dagong Global rating. NORWAY DENMARK LUXEMBURG SWITZERLAND SINGAPORE AUSTRALIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA AA+ AA+ AA+ AA AA+ AA AA AA AA AA AA- AA- A+ Local Currency Fereign Currency Local Currency Fereign Currency Local Currency fereige Currency Local Currency Foreign Currency Local Currency Fereign Currency Local CurrencyFereign Currency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * AAA * AAA * AAA CHINA GERMANY SAUDI ARABIA NEW ZELAND CANADA NETHERLANDS AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA4 AA+ AA+ AA+ AA+ AA+ AA AA AA AA AA 10 11 12 AA AA- Local Currency Foreign Cumency Local Currency Fereign Cumency Local Currency Fereign Currency Lacal Currency Fereign Curency Lecal Currency fereion Currency Lecal Currency Foreign Curency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * A+ * AAA * AA- SOUTH KOREA JAPAN BRITAIN FRANCE UNITED STATES AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ AA AA AA AA AAA AAA 14 15 16 17 AA- AA AA+ AA+ A+ A+ Local Currency foreign Currenry Local Currency Foreign Currency Local Currencyfereign Currency Lecal Currencyforeign Currency AA AA STABLE STABLE NEGATIVE STABLE NEGATIVE NEGATIVE NEGATIVE NEGATIVE 13 * A+ AA * AAA * AAA AA- AA- BELGIUM CHILE SOUTH AFRICA A+ AAA AAA AAA AAA AA+ AA+ AA+ AA+ A AA AA AA 20 AA 18 19 The ranking under each country represents the Standard & Poor's (S&P) sovereign credit ratings. AA AA AA- AA Local Currency Foreign Currency NEGATIVE NEGATIVE Local Currency Local Currencyfereign Currency Local Currency foreign Currency STABLE Fereign Cumency STABLE STABLE STABLE STABLE STABLE * AAA * AA+ * AA * A+ U.S. Federal Debt by years What Credit Ratings Mean Gross Debt Public Debt AAA Prime Top notch AA+ 12 • High grade AA AA- A+ 10 Under • Upper medium grade Debt (trillions of 2009 dollars) observation вв- BBB • Lower medium grade вBв- BB+ Non-investment grade в 4 в- • Speculative B+ Junk в • Highly speculative в- cc- • Sunstantial risks 1940 1950 1960 1970 1980 1990 2000 2010 cCc • Extremely speculative Implications of a Lowered Credit Rating Firstly credit ratings are an evaluation of how likely a country is to default on government debt (bonds). If a country has a credit rating reduced it has certain effects. More expensive to insure against default. O In Feb of 2009 it would have cost $5.95 million in advance and $500,000 a year to insure against $10 million of Ukraine government bonds for 5 years. In other words if you bought $10 million Ukraine bonds you would have to spend about $8.5 million in insuring against default. This reflects the markets anticipation of debt default. Downward pressure on currency. If investors felt the UK was likely to default, foreigners would be less willing to hold UK bonds and therefore UK currency. This lower demand would cause a depreciation in the currency. Smaller Current Account Deficit. O O Risk of Hyperinflation. If less foreigners want to hold US treasuries, it means there are less capital flows into the US, therefore, the US would have to run a smaller current account deficit. This could limit US growth. If you have junk status and noone wants to buy your debt, there is a risk a government would resort to printing money thereby causing inflation. It becomes more expensive for government to borrow. If investors see a countries bonds as risky, they will require a higher interest rate to compensate for risk. The greater the risk, the higher the interest rate required. If you are borrowing £175bn a year, even a 1% increase in bond yields can cause a large increase in interest payments on your debt. Sources: Dagong Global | economicshelp.com | guardian.co.uk Information provided by: www.creditscore.net CREDITSCORE U.S. CREDIT RATING Compared to the World When the consumer era of easy credit came to an end in 2008, the federal government stepped in and tried to solve it with a burst of spending. But now the government's era of easy credit may be coming to an end, too. In March, it was reported that the U.S. is risking its AAA credit rating. Here's a look at how the U.S. compares to other countries and how a downgrade would impact the country. TOP 20 OF SOVEREIGN CREDIT RATINGS Sovereign credit ratings are reported by Dagong Global, a Chinese ratings agency. In the issue of fairness, the ratings from New York-based Standard & Poor's are included below the Dagong Global rating. NORWAY DENMARK LUXEMBURG SWITZERLAND SINGAPORE AUSTRALIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA AA AA. AA+ AA AA+ AA+ AA+ AA. AA+ AA AA AA AA AA AA AA 6 AA- AA- AA- Local Currenry Fereign Currency Local Currency Foreign Currency Local Currency Fereign Currency Local Currency Foreign Currency Local Currency Fereign Currency Local Currency Fereign Curency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * AAA * AAA * ΑΑΑ NEW ZELAND CANADA NETHERLANDS CHINA GERMANY SAUDI ARABIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA4 AA+ AA+ AA AA+ AA+ AA+ AA+ AA AA AA AA AA AA AA AA 7 8 9 10 11 12 AA- A AA- Local Currency fereign Cumency Local CurrencyForeign Currency Local CurrencY fereign Curency Local Currency fereign Currency Lecal Currency foreign Currency STABLE Lecal Curency Fereign Currency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * A+ * AAA * AA- SOUTH KOREA JAPAN BRITAIN FRANCE UNITED STATES AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA AA AA AA AA AAA AAA 14 15 16 17 AA- AA AA+ AA+ A+ A+ Local Currencyforeign Currenry Local Currency Foreign Currency Local Currency Foreign Currency Lecal Currency Fereign Cumency AA AA STABLE STABLE NEGATIVE STABLE NEGATIVE NEGATIVE NEGATIVE NEGATIVE 13 * A+ AA * AAA * AAA AA- AA- BELGIUM CHILE SOUTH AFRICA A+ A+ AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ A A 18 AA AA AA AA 20 AA 19 The ranking under each country represents the Standard & Poor's (S&P) sovereign credit ratings. AA AA- AA AA. AA AA Local Currency Foreign Currency NEGATIVE NEGATIVE Local Currency foreion Currency Local Currency Foreign Currengr Local CurrencyForeign Currency STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AA+ * AA * A+ U.S. Federal Debt by years What Credit Ratings Mean Gross Debt Public Debt Prime Top notch AAA AA+ 12 • High grade AA AA- A+ 10 Under • Upper medium grade A Debt (trillions of 2009 dollars) observation 8 BBB BBB • Lower medium grade BBB- 6 BB+ Non-investment grade в BB- • Speculative B+ Junk в • Highly speculative B- • Sunstantial risks 1940 1950 1960 1970 1980 1990 2000 2010 • Extremely speculative Implications of a Lowered Credit Rating Firstly credit ratings are an evaluation of how likely a country is to default on government debt (bonds). If a country has a credit rating reduced it has certain effects. More expensive to insure against default. O In Feb of 2009 it would have cost $5.95 million in advance and $500,000 a year to insure against $10 million of Ukraine government bonds for 5 years. In other words if you bought $10 million Ukraine bonds you would have to spend about $8.5 million in insuring against default. This reflects the markets anticipation of debt default. Downward pressure on currency. If investors felt the UK was likely to default, foreigners would be less willing to hold UK bonds and therefore UK currency. This lower demand would cause a depreciation in the currency. Smaller Current Account Deficit. O Risk of Hyperinflation. If less foreigners want to hold US treasuries, it means there are less capital flows into the US, therefore, the US would have to run a smaller current account deficit. This could limit US growth. If you have junk status and noone wants to buy your debt, there is a risk a government would resort to printing money thereby causing inflation. It becomes more expensive for government to borrow. If investors see a countries bonds as risky, they will require a higher interest rate to compensate for risk. The greater the risk, the higher the interest rate required. If you are borrowing £175bn a year, even a 1% increase in bond yields can cause a large increase in interest payments on your debt. Sources: Dagong Global | economicshelp.com | guardian.co.uk Information provided by: www.creditscore.net CREDITSCORE U.S. CREDIT RATING Compared to the World When the consumer era of easy credit came to an end in 2008, the federal government stepped in and tried to solve it with a burst of spending. But now the government's era of easy credit may be coming to an end, too. In March, it was reported that the U.S. is risking its AAA credit rating. Here's a look at how the U.S. compares to other countries and how a downgrade would impact the country. TOP 20 OF SOVEREIGN CREDIT RATINGS Sovereign credit ratings are reported by Dagong Global, a Chinese ratings agency. In the issue of fairness, the ratings from New York-based Standard & Poor's are included below the Dagong Global rating. NORWAY DENMARK LUXEMBURG SWITZERLAND SINGAPORE AUSTRALIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA AA AA. AA+ AA AA+ AA+ AA+ AA. AA+ AA AA AA AA AA AA AA 6 AA- AA- AA- Local Currenry Fereign Currency Local Currency Foreign Currency Local Currency Fereign Currency Local Currency Foreign Currency Local Currency Fereign Currency Local Currency Fereign Curency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * AAA * AAA * ΑΑΑ NEW ZELAND CANADA NETHERLANDS CHINA GERMANY SAUDI ARABIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA4 AA+ AA+ AA AA+ AA+ AA+ AA+ AA AA AA AA AA AA AA AA 7 8 9 10 11 12 AA- A AA- Local Currency fereign Cumency Local CurrencyForeign Currency Local CurrencY fereign Curency Local Currency fereign Currency Lecal Currency foreign Currency STABLE Lecal Curency Fereign Currency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * A+ * AAA * AA- SOUTH KOREA JAPAN BRITAIN FRANCE UNITED STATES AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA AA AA AA AA AAA AAA 14 15 16 17 AA- AA AA+ AA+ A+ A+ Local Currencyforeign Currenry Local Currency Foreign Currency Local Currency Foreign Currency Lecal Currency Fereign Cumency AA AA STABLE STABLE NEGATIVE STABLE NEGATIVE NEGATIVE NEGATIVE NEGATIVE 13 * A+ AA * AAA * AAA AA- AA- BELGIUM CHILE SOUTH AFRICA A+ A+ AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ A A 18 AA AA AA AA 20 AA 19 The ranking under each country represents the Standard & Poor's (S&P) sovereign credit ratings. AA AA- AA AA. AA AA Local Currency Foreign Currency NEGATIVE NEGATIVE Local Currency foreion Currency Local Currency Foreign Currengr Local CurrencyForeign Currency STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AA+ * AA * A+ U.S. Federal Debt by years What Credit Ratings Mean Gross Debt Public Debt Prime Top notch AAA AA+ 12 • High grade AA AA- A+ 10 Under • Upper medium grade A Debt (trillions of 2009 dollars) observation 8 BBB BBB • Lower medium grade BBB- 6 BB+ Non-investment grade в BB- • Speculative B+ Junk в • Highly speculative B- • Sunstantial risks 1940 1950 1960 1970 1980 1990 2000 2010 • Extremely speculative Implications of a Lowered Credit Rating Firstly credit ratings are an evaluation of how likely a country is to default on government debt (bonds). If a country has a credit rating reduced it has certain effects. More expensive to insure against default. O In Feb of 2009 it would have cost $5.95 million in advance and $500,000 a year to insure against $10 million of Ukraine government bonds for 5 years. In other words if you bought $10 million Ukraine bonds you would have to spend about $8.5 million in insuring against default. This reflects the markets anticipation of debt default. Downward pressure on currency. If investors felt the UK was likely to default, foreigners would be less willing to hold UK bonds and therefore UK currency. This lower demand would cause a depreciation in the currency. Smaller Current Account Deficit. O Risk of Hyperinflation. If less foreigners want to hold US treasuries, it means there are less capital flows into the US, therefore, the US would have to run a smaller current account deficit. This could limit US growth. If you have junk status and noone wants to buy your debt, there is a risk a government would resort to printing money thereby causing inflation. It becomes more expensive for government to borrow. If investors see a countries bonds as risky, they will require a higher interest rate to compensate for risk. The greater the risk, the higher the interest rate required. If you are borrowing £175bn a year, even a 1% increase in bond yields can cause a large increase in interest payments on your debt. Sources: Dagong Global | economicshelp.com | guardian.co.uk Information provided by: www.creditscore.net CREDITSCORE U.S. CREDIT RATING Compared to the World When the consumer era of easy credit came to an end in 2008, the federal government stepped in and tried to solve it with a burst of spending. But now the government's era of easy credit may be coming to an end, too. In March, it was reported that the U.S. is risking its AAA credit rating. Here's a look at how the U.S. compares to other countries and how a downgrade would impact the country. TOP 20 OF SOVEREIGN CREDIT RATINGS Sovereign credit ratings are reported by Dagong Global, a Chinese ratings agency. In the issue of fairness, the ratings from New York-based Standard & Poor's are included below the Dagong Global rating. NORWAY DENMARK LUXEMBURG SWITZERLAND SINGAPORE AUSTRALIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA AA AA. AA+ AA AA+ AA+ AA+ AA. AA+ AA AA AA AA AA AA AA 6 AA- AA- AA- Local Currenry Fereign Currency Local Currency Foreign Currency Local Currency Fereign Currency Local Currency Foreign Currency Local Currency Fereign Currency Local Currency Fereign Curency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * AAA * AAA * ΑΑΑ NEW ZELAND CANADA NETHERLANDS CHINA GERMANY SAUDI ARABIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA4 AA+ AA+ AA AA+ AA+ AA+ AA+ AA AA AA AA AA AA AA AA 7 8 9 10 11 12 AA- A AA- Local Currency fereign Cumency Local CurrencyForeign Currency Local CurrencY fereign Curency Local Currency fereign Currency Lecal Currency foreign Currency STABLE Lecal Curency Fereign Currency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * A+ * AAA * AA- SOUTH KOREA JAPAN BRITAIN FRANCE UNITED STATES AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA AA AA AA AA AAA AAA 14 15 16 17 AA- AA AA+ AA+ A+ A+ Local Currencyforeign Currenry Local Currency Foreign Currency Local Currency Foreign Currency Lecal Currency Fereign Cumency AA AA STABLE STABLE NEGATIVE STABLE NEGATIVE NEGATIVE NEGATIVE NEGATIVE 13 * A+ AA * AAA * AAA AA- AA- BELGIUM CHILE SOUTH AFRICA A+ A+ AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ A A 18 AA AA AA AA 20 AA 19 The ranking under each country represents the Standard & Poor's (S&P) sovereign credit ratings. AA AA- AA AA. AA AA Local Currency Foreign Currency NEGATIVE NEGATIVE Local Currency foreion Currency Local Currency Foreign Currengr Local CurrencyForeign Currency STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AA+ * AA * A+ U.S. Federal Debt by years What Credit Ratings Mean Gross Debt Public Debt Prime Top notch AAA AA+ 12 • High grade AA AA- A+ 10 Under • Upper medium grade A Debt (trillions of 2009 dollars) observation 8 BBB BBB • Lower medium grade BBB- 6 BB+ Non-investment grade в BB- • Speculative B+ Junk в • Highly speculative B- • Sunstantial risks 1940 1950 1960 1970 1980 1990 2000 2010 • Extremely speculative Implications of a Lowered Credit Rating Firstly credit ratings are an evaluation of how likely a country is to default on government debt (bonds). If a country has a credit rating reduced it has certain effects. More expensive to insure against default. O In Feb of 2009 it would have cost $5.95 million in advance and $500,000 a year to insure against $10 million of Ukraine government bonds for 5 years. In other words if you bought $10 million Ukraine bonds you would have to spend about $8.5 million in insuring against default. This reflects the markets anticipation of debt default. Downward pressure on currency. If investors felt the UK was likely to default, foreigners would be less willing to hold UK bonds and therefore UK currency. This lower demand would cause a depreciation in the currency. Smaller Current Account Deficit. O Risk of Hyperinflation. If less foreigners want to hold US treasuries, it means there are less capital flows into the US, therefore, the US would have to run a smaller current account deficit. This could limit US growth. If you have junk status and noone wants to buy your debt, there is a risk a government would resort to printing money thereby causing inflation. It becomes more expensive for government to borrow. If investors see a countries bonds as risky, they will require a higher interest rate to compensate for risk. The greater the risk, the higher the interest rate required. If you are borrowing £175bn a year, even a 1% increase in bond yields can cause a large increase in interest payments on your debt. Sources: Dagong Global | economicshelp.com | guardian.co.uk Information provided by: www.creditscore.net CREDITSCORE U.S. CREDIT RATING Compared to the World When the consumer era of easy credit came to an end in 2008, the federal government stepped in and tried to solve it with a burst of spending. But now the government's era of easy credit may be coming to an end, too. In March, it was reported that the U.S. is risking its AAA credit rating. Here's a look at how the U.S. compares to other countries and how a downgrade would impact the country. TOP 20 OF SOVEREIGN CREDIT RATINGS Sovereign credit ratings are reported by Dagong Global, a Chinese ratings agency. In the issue of fairness, the ratings from New York-based Standard & Poor's are included below the Dagong Global rating. NORWAY DENMARK LUXEMBURG SWITZERLAND SINGAPORE AUSTRALIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA AA AA. AA+ AA AA+ AA+ AA+ AA. AA+ AA AA AA AA AA AA AA 6 AA- AA- AA- Local Currenry Fereign Currency Local Currency Foreign Currency Local Currency Fereign Currency Local Currency Foreign Currency Local Currency Fereign Currency Local Currency Fereign Curency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * AAA * AAA * ΑΑΑ NEW ZELAND CANADA NETHERLANDS CHINA GERMANY SAUDI ARABIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA4 AA+ AA+ AA AA+ AA+ AA+ AA+ AA AA AA AA AA AA AA AA 7 8 9 10 11 12 AA- A AA- Local Currency fereign Cumency Local CurrencyForeign Currency Local CurrencY fereign Curency Local Currency fereign Currency Lecal Currency foreign Currency STABLE Lecal Curency Fereign Currency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * A+ * AAA * AA- SOUTH KOREA JAPAN BRITAIN FRANCE UNITED STATES AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA AA AA AA AA AAA AAA 14 15 16 17 AA- AA AA+ AA+ A+ A+ Local Currencyforeign Currenry Local Currency Foreign Currency Local Currency Foreign Currency Lecal Currency Fereign Cumency AA AA STABLE STABLE NEGATIVE STABLE NEGATIVE NEGATIVE NEGATIVE NEGATIVE 13 * A+ AA * AAA * AAA AA- AA- BELGIUM CHILE SOUTH AFRICA A+ A+ AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ A A 18 AA AA AA AA 20 AA 19 The ranking under each country represents the Standard & Poor's (S&P) sovereign credit ratings. AA AA- AA AA. AA AA Local Currency Foreign Currency NEGATIVE NEGATIVE Local Currency foreion Currency Local Currency Foreign Currengr Local CurrencyForeign Currency STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AA+ * AA * A+ U.S. Federal Debt by years What Credit Ratings Mean Gross Debt Public Debt Prime Top notch AAA AA+ 12 • High grade AA AA- A+ 10 Under • Upper medium grade A Debt (trillions of 2009 dollars) observation 8 BBB BBB • Lower medium grade BBB- 6 BB+ Non-investment grade в BB- • Speculative B+ Junk в • Highly speculative B- • Sunstantial risks 1940 1950 1960 1970 1980 1990 2000 2010 • Extremely speculative Implications of a Lowered Credit Rating Firstly credit ratings are an evaluation of how likely a country is to default on government debt (bonds). If a country has a credit rating reduced it has certain effects. More expensive to insure against default. O In Feb of 2009 it would have cost $5.95 million in advance and $500,000 a year to insure against $10 million of Ukraine government bonds for 5 years. In other words if you bought $10 million Ukraine bonds you would have to spend about $8.5 million in insuring against default. This reflects the markets anticipation of debt default. Downward pressure on currency. If investors felt the UK was likely to default, foreigners would be less willing to hold UK bonds and therefore UK currency. This lower demand would cause a depreciation in the currency. Smaller Current Account Deficit. O Risk of Hyperinflation. If less foreigners want to hold US treasuries, it means there are less capital flows into the US, therefore, the US would have to run a smaller current account deficit. This could limit US growth. If you have junk status and noone wants to buy your debt, there is a risk a government would resort to printing money thereby causing inflation. It becomes more expensive for government to borrow. If investors see a countries bonds as risky, they will require a higher interest rate to compensate for risk. The greater the risk, the higher the interest rate required. If you are borrowing £175bn a year, even a 1% increase in bond yields can cause a large increase in interest payments on your debt. Sources: Dagong Global | economicshelp.com | guardian.co.uk Information provided by: www.creditscore.net CREDITSCORE U.S. CREDIT RATING Compared to the World When the consumer era of easy credit came to an end in 2008, the federal government stepped in and tried to solve it with a burst of spending. But now the government's era of easy credit may be coming to an end, too. In March, it was reported that the U.S. is risking its AAA credit rating. Here's a look at how the U.S. compares to other countries and how a downgrade would impact the country. TOP 20 OF SOVEREIGN CREDIT RATINGS Sovereign credit ratings are reported by Dagong Global, a Chinese ratings agency. In the issue of fairness, the ratings from New York-based Standard & Poor's are included below the Dagong Global rating. NORWAY DENMARK LUXEMBURG SWITZERLAND SINGAPORE AUSTRALIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA AA AA. AA+ AA AA+ AA+ AA+ AA. AA+ AA AA AA AA AA AA AA 6 AA- AA- AA- Local Currenry Fereign Currency Local Currency Foreign Currency Local Currency Fereign Currency Local Currency Foreign Currency Local Currency Fereign Currency Local Currency Fereign Curency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * AAA * AAA * ΑΑΑ NEW ZELAND CANADA NETHERLANDS CHINA GERMANY SAUDI ARABIA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AAA AA4 AA+ AA+ AA AA+ AA+ AA+ AA+ AA AA AA AA AA AA AA AA 7 8 9 10 11 12 AA- A AA- Local Currency fereign Cumency Local CurrencyForeign Currency Local CurrencY fereign Curency Local Currency fereign Currency Lecal Currency foreign Currency STABLE Lecal Curency Fereign Currency STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AAA * AAA * A+ * AAA * AA- SOUTH KOREA JAPAN BRITAIN FRANCE UNITED STATES AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA AA AA AA AA AAA AAA 14 15 16 17 AA- AA AA+ AA+ A+ A+ Local Currencyforeign Currenry Local Currency Foreign Currency Local Currency Foreign Currency Lecal Currency Fereign Cumency AA AA STABLE STABLE NEGATIVE STABLE NEGATIVE NEGATIVE NEGATIVE NEGATIVE 13 * A+ AA * AAA * AAA AA- AA- BELGIUM CHILE SOUTH AFRICA A+ A+ AAA AAA AAA AAA AA+ AA+ AA+ AA+ AA+ A A 18 AA AA AA AA 20 AA 19 The ranking under each country represents the Standard & Poor's (S&P) sovereign credit ratings. AA AA- AA AA. AA AA Local Currency Foreign Currency NEGATIVE NEGATIVE Local Currency foreion Currency Local Currency Foreign Currengr Local CurrencyForeign Currency STABLE STABLE STABLE STABLE STABLE STABLE * AAA * AA+ * AA * A+ U.S. Federal Debt by years What Credit Ratings Mean Gross Debt Public Debt Prime Top notch AAA AA+ 12 • High grade AA AA- A+ 10 Under • Upper medium grade A Debt (trillions of 2009 dollars) observation 8 BBB BBB • Lower medium grade BBB- 6 BB+ Non-investment grade в BB- • Speculative B+ Junk в • Highly speculative B- • Sunstantial risks 1940 1950 1960 1970 1980 1990 2000 2010 • Extremely speculative Implications of a Lowered Credit Rating Firstly credit ratings are an evaluation of how likely a country is to default on government debt (bonds). If a country has a credit rating reduced it has certain effects. More expensive to insure against default. O In Feb of 2009 it would have cost $5.95 million in advance and $500,000 a year to insure against $10 million of Ukraine government bonds for 5 years. In other words if you bought $10 million Ukraine bonds you would have to spend about $8.5 million in insuring against default. This reflects the markets anticipation of debt default. Downward pressure on currency. If investors felt the UK was likely to default, foreigners would be less willing to hold UK bonds and therefore UK currency. This lower demand would cause a depreciation in the currency. Smaller Current Account Deficit. O Risk of Hyperinflation. If less foreigners want to hold US treasuries, it means there are less capital flows into the US, therefore, the US would have to run a smaller current account deficit. This could limit US growth. If you have junk status and noone wants to buy your debt, there is a risk a government would resort to printing money thereby causing inflation. It becomes more expensive for government to borrow. If investors see a countries bonds as risky, they will require a higher interest rate to compensate for risk. The greater the risk, the higher the interest rate required. If you are borrowing £175bn a year, even a 1% increase in bond yields can cause a large increase in interest payments on your debt. Sources: Dagong Global | economicshelp.com | guardian.co.uk Information provided by: www.creditscore.net CREDITSCORE