By Marc Jones
LONDON (Reuters) – Canada became the latest country to be stripped of a prized ‘triple A’ sovereign credit rating after Fitch downgraded it on Wednesday.
Graphic: The dwindling triple A world – https://fingfx.thomsonreuters.com/gfx/mkt/azgporrrwvd/Pasted%20image%201593092068087.png
Fitch now has the fewest ‘AAAs’ since 2003. After Wednesday’s downgrade of Canada, it now rates 11 sovereigns ‘AAA’, the fewest since 2003 and, at less than 10% of rated sovereigns, the smallest ever share of the sovereign portfolio.
From August 2004 until April 2009, there were between 16-19 ‘AAA’ sovereigns, the highest number ever, and the period of greatest ‘AAA’ stability. Historically, 18 sovereigns have had top grades with Fitch, while there were 19 on S&P global’s list going into the 2008 financial crisis.
Japan was the first sovereign to lose its ‘AAA’ rating, in 1998 from Fitch and 2001 from S&P. Since then Austria, Finland, France, Ireland, Spain, Britain, in the case of S&P the United States and now Canada for Fitch have all followed suit.
There have been few recent upgrades into the coveted bracket. The Netherlands got its back from S&P in late 2015, Australia also won its from Fitch in November 2011 though it had earned it back as early as 2003 from S&P.
Canada, Netherlands, Sweden, Finland, Denmark, Australia have all regained S&P ‘AAA’ ratings after losing them a various points, though no country has even regained one stripped by Fitch.
Graphic: Falling AAAngels – https://fingfx.thomsonreuters.com/gfx/mkt/bdwvkaaajvm/Pasted%20image%201593094430902.png
With the fall in the number of ‘AAA’ sovereigns, their collective shares of global government debt and GDP have declined as well.
Fitch estimated that at end-2006, prior to the onset of the global financial crisis, ‘AAA’ sovereigns accounted for nearly half of total government debt.
Analysts at ING estimate that it is now below 25%, while S&P which no longer grades the U.S. – the world’s biggest government borrower – as triple A, calculated it to be around 7% last year.
Graphic: Falling share of AAA rated govt debt – https://fingfx.thomsonreuters.com/gfx/mkt/rlgpdllnnpo/Pasted%20image%201593099093881.png
(Reporting by Marc Jones; Editing by Hugh Lawson)
