Rating Volatility in Sharp Decline – Report

Both an increase in credit rating upgrades and a decrease in credit rating downgrades last quarter markedly slowed the rate of decline in global credit quality, according to Moody’s. Rating reviews and outlooks taken generally also suggest that we are entering a period of relative ratings stability, said the ratings agency. For the quarter just ended, downgrades outpaced upgrades by a ratio of 1.3 to 1, down from the 2.1 to 1 rate of the previous quarter and the 4.3 to 1 pace during the fourth quarter of 2002. Last quarter saw both the portion of issuers downgraded fall, from 3.9 per cent in the third quarter to 3.4 per cent, and the percentage of upgrades rise, from 1.9 per cent in the third quarter to 2.7 per cent. ‘The improvement in the composition of rating actions last quarter took place predominately outside the United States and Canada,’ noted Moody’s analyst Hong Sherwin. ‘The pace of credit downgrades in the US and Canada actually picked up, from 1.9 per cent to 2.7 per cent of all issuers, while the pace of those upgraded rose only marginally, from 1.5 per cent to 1.7 per cent. Meanwhile, the percentage of issuers in Europe downgraded last quarter dropped from 4.5 per cent to 2.5 per cent. When the US and Canada are excluded, upgrades outpaced downgrades by 2 to 1 last quarter.’


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