Sovereign Credit Rating

AAA

DEFINITION of 'Sovereign Credit Rating'

The credit rating of a country or sovereign entity. Sovereign credit ratings give investors insight into the level of risk associated with investing in a particular country and also include political risks. At the request of the country, a credit rating agency will evaluate the country's economic and political environment to determine a representative credit rating. Obtaining a good sovereign credit rating is usually essential for developing countries in order to access funding in international bond markets.

INVESTOPEDIA EXPLAINS 'Sovereign Credit Rating'

Another common reason for obtaining sovereign credit ratings, other than issuing bonds in external debt markets, is to attract foreign direct investment. To give investors confidence in investing in their country, many countries seek ratings from credit rating agencies like Standard and Poors, Moody's, and Fitch to provide financial transparency and demonstrate their credit standing.

RELATED TERMS
  1. Revenue Regulation Fund

    The Revenue Regulation Fund is a sovereign wealth fund for the ...
  2. Strategic Investment Fund

    The Strategic Investment Fund is a government-owned sovereign ...
  3. Hong Kong Monetary Authority Investment ...

    A sovereign wealth fund of the Government of the Hong Kong Special ...
  4. Investment Corporation Of Dubai ...

    The Investment Corporation of Dubai (ICD) is a government-owned ...
  5. International Petroleum Investment ...

    The International Petroleum Investment Company (IPIC) is a government-owned ...
  6. Japan Credit Rating Agency - JCR

    One of the key credit rating agencies in Japan. JCR provides ...
RELATED FAQS
  1. Why do developed countries run current account deficits?

    Discover why developed countries tend to run current account deficits and why running a current account deficit is not a ...
Related Articles
  1. Insurance

    Investing Beyond Your Borders

    Investing abroad poses risks, but can also help you diversify. Discover ways to invest in foreign stocks.
  2. Options & Futures

    Evaluating Country Risk For International Investing

    Investing overseas begins with determining the risk of the country's investment climate.
  3. Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

    Discover some of the key factors for determining a fund's risk-return profile.
  4. Mutual Funds & ETFs

    Finding Fortune In Foreign-Stock ETFs

    Think beyond your borders to reduce the impact of local market downturns.
  5. Investing News

    Sun Pharma And Ranbaxy: An Ideal Pharma Marriage?

    The Sun Pharma merger with Ranbaxy will blend the complementary market strengths and areas of expertise of each company and create a powerful pharma force.
  6. Economics

    Does A Junk Rating Reflect Russia's Fundamentals?

    Moody’s, like other credit rating agencies, has downgraded Russia’s sovereign debt rating to non-investment grade, but does this reflect Russia's economy?
  7. Economics

    Growth and Stabilization In The Global Economy

    The continued advance for stocks implies a stabilization in international economies, which indicates global growth is steadying after declining last year.
  8. Investing

    Hedged ETFs That Help You Cushion Currency Impact

    If you’re an investor holding non-U.S. assets, the returns on your investments will be affected when you translate your investment from its local currency
  9. Investing

    What Has Been Groupon’s Growth Strategy?

    Groupon established a strategy with efforts to become a broader force in the e-commerce world and to expand more strongly into international markets.
  10. Investing

    The Impact Of A Stronger Dollar In The Markets

    The economy continues to improve, but also demonstrated that some areas of the stock market are more vulnerable to an increase in interest rates.

You May Also Like

Hot Definitions
  1. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  2. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  3. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  4. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  5. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
  6. Irrevocable Trust

    A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets ...
Trading Center