What is a sovereign credit rating? How countries are graded
By SendPay Business · · 2 min read
A sovereign credit rating is a grade that tells investors how likely a country's government is to repay its debts. The three best-known rating agencies are S&P Global, Moody's and Fitch.
How the grades work
- The top grade is AAA (Aaa at Moody's), meaning very low risk.
- Grades step down through AA, A and BBB, which are still investment grade.
- Anything below BBB- (Baa3 at Moody's) is called sub-investment grade, or junk.
Why a downgrade matters
A lower rating can mean investors ask for higher interest to lend to that government. Some funds are only allowed to hold investment-grade bonds, so a fall to junk can force them to sell. The UK, for example, lost its top AAA rating from Moody's in 2013.
Effect on currencies
A downgrade can make a country's assets less attractive to foreign investors, which can weaken its currency. Often the effect is small because markets have already expected the change, but a surprise cut or a drop to junk can cause sharper moves.
Where SendPay fits
SendPay platforms let customers hold GBP, EUR and USD and exchange between them at a fee the platform owner sets, powered by licensed partners. SendPay doesn't offer trading.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.