Not pretty, reports WSJ which did some research covering the last 35 years. If a government is rated single-A or better, the news is good -- none defaulted over this time period. But the ratings do a poor job discriminating in the B range. The best example: Brazil and Argentina were both rated double B minus in January 2001. One year later, Argentina defaulted on its debt whereas Brazil has grown steadily over the last 10 years.
In practice, the bond market forces default-probable countries to pay an interest rate premium. So what are the ratings agencies really doing to create value when they assess sovereign risk?
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Beanie Babies
5 years ago
Perhaps the question is "what are the ratings agencies doing to create value?"
ReplyDelete10 years? Isn't it too much?
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