Definition, Typology, and Refinement of Sovereign Ratings



In its first 1918 Manual and Investment Letters, Moody’s defined its sovereign ­ratings as the relative creditworthiness of government. This measure has two ­components: the ability and the willingness (or the “good faith”) to repay the debt. In 1919, Moody’s claimed that its measure of creditworthiness was valid generally and it established a credit scale of main sovereigns. The United States led this classification with 100% (“probability” that the country will take care of its debt in every respect), ahead of Canada (95%), the United Kingdom (90%), Belgium (85%), France (75%), Italy (70%), Germany (65%), Austria (60%), and Russia (55%). The agency indicated that its ratings conveyed the probability of country respecting its financial obligations. The manuals published by Poor’s, Fitch and Standard Statistics, gave a similar definition of their ratings.


Credit Rating Foreign Currency Speculative Grade Default Probability Bond Rating 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Eichengreen B., Hausmann R. and Panizza U. (2005), “The Mystery of Original Sin”, in Eichengreen B. and Hausmann R. (eds.), Other People’s Money, Chicago University Press, Chicago.Google Scholar
  2. Fitch (various years), Fitch Bond Book.Google Scholar
  3. Fitch IBCA (1998), “Fitch Sovereign Ratings – Rating Methodology”.Google Scholar
  4. Fitch Ratings (2002), “Indonesia Upgraded to B, Outlook Stable”, 1 August.Google Scholar
  5. Fitch Ratings (2005a), “The Role of Recovery Analysis in Ratings – Enhancing Informational Content and Transparency”, 14 February.Google Scholar
  6. Fitch Ratings (2005b), “Sovereign Issuer Default and Recovery Ratings”, 14 December.Google Scholar
  7. Fitch Ratings (2008), “Local Currency Debt Markets Emerge from the Shadows”, 3 April.Google Scholar
  8. Fitch Ratings (2009), “Definitions of Ratings and Other Scales”, March.Google Scholar
  9. Harold G. (1938), Bond Ratings as an Investment Guide, Ronald Press Company, New York.Google Scholar
  10. Hausmann R. and Panizza U. (2010), “Redemption or abstinence? Original sin, currency ­mismatches and counter-cyclical policies in the new millennium”, Working Paper No. 194, Centre for International Development at Harvard University, January.Google Scholar
  11. Kliger D. and Sarig O. (2000), “The Information Value of Bond Ratings”, Journal of Finance, Vol. 55, No. 6.CrossRefGoogle Scholar
  12. Moody’s Investors Service (various years), Moody’s Manual of Investments – American and Foreign Government Securities.Google Scholar
  13. Moody’s Investors Service (various years), “Moody’s Investment Letters”.Google Scholar
  14. Moody’s Investors Service (1999), “Rating Methodology – The Usefulness of Local Currency Ratings in Countries with Low Foreign Currency Country Ceilings”, July.Google Scholar
  15. Moody’s Investors Service (2001), “Revised Country Ceiling Policy – Rating Methodology”, June.Google Scholar
  16. Moody’s Investors Service (2004), “Tracing the Origins of ‘Investment Grade’”, January.Google Scholar
  17. Moody’s Investors Service (2008), “A Guide to Moody’s Sovereign Ratings”, December.Google Scholar
  18. Moody’s Investors Service (2010a), “Sovereign Default and Recovery Rates, 1983–2009”, April.Google Scholar
  19. Moody’s Investors Service (2010b), “Rating Symbols and Definitions”, October.Google Scholar
  20. Poor’s (various years), Poor’s Volume.Google Scholar
  21. Poor’s (various years), Poor’s Rating Services.Google Scholar
  22. Standard & Poor’s (1979), Standard & Poor’s Ratings Guide 1979.Google Scholar
  23. Standard & Poor’s (2003), “Sovereign Defaults: Heading Lower Into 2004”, 18 September.Google Scholar
  24. Standard & Poor’s (2005), “Sovereign Foreign and Local Currency Rating Differentials”, 19 October.Google Scholar
  25. Standard & Poor’s (2007), “Introduction of Sovereign Recovery Ratings”, 14 June.Google Scholar
  26. Standard & Poor’s (2010a), “Sovereign Rating and Country T&C Assessment Histories”, 13 April.Google Scholar
  27. Standard & Poor’s (2010b), “Standard & Poor’s Ratings Definitions”, 3 May.Google Scholar
  28. Standard Statistics (various years), Standard Bond Books.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Economic Policy and Debt DepartmentThe World BankWashingtonUSA

Personalised recommendations